Flipkart Myntra to Merge? [Understanding Myntra Valuation]

Will they? Won’t they? and Myntra have been dancing for many months now. Well, we didn’t start the fire. In this case, we seem to have a great choreographer as well!

It almost feels like Rakhi Sawant’s swayamvar, just that this time we might be debating about the ecommerce store she ordered her clothes from (isn’t Amazon launching its apparel category this month?).

Now that Flipkart/Myntra merger is doing the rounds again, we ask how much is Myntra worth? $250mn? $350mn? We can never really be sure, but it’s worth noting that the two companies have common investors and it might be in their interest to stop them fighting each other.

Flipkart Myntra

Common Investors + Margin Boost?

Accel has been known to be a M&A friendly Investor. Take a look at the past:

Flipkart : LetsBuy

Myntra : Shersingh

For Flipkart, Apparel is the NextBigWhat category to crack and the company has been trying to catch up with Myntra, which is a market leader in the category. Although apparel is a high margin business, the war between the two would mean large discounts and paying a lot of money to Google for search engine marketing, at the expense of investors.

Flipkart & Myntra : The Common Investors

Tiger Global, Accel Partners and Sofina are common investors in Flipkart and Myntra. It would have cost them all a fortune if the two had continued to battle it out while Amazon on one end and Snapdeal on the other (Snapdeal recently raised $133.7mn led by eBay)

As we’d written before, there are synergies between the two companies that could make this acquisition work for them (though important to note that Myntra is a pure-inventory model, while Flipkart is a marketplace).

And both Flipkart and Myntra are also notching up losses as their revenues go up. It really isn’t such a bad idea for the two to merge and gain from the scale.

Myntra : Far Far Away From Profitability?

Myntra posted Rs 134 cr loss on a topline of Rs 212 cr for the year ending 31 March 2013. In the year before (2012), Myntra’s revenues were Rs 67 cr and losses were Rs 51 cr. Flipkart, on the other hand reported a loss of Rs 281.7 crore in the year ended March 2013, up from Rs 109.9 cr in the previous year.

Both companies will also save costs as they begin to source from the same vendors (avoid competition) and Myntra’s connect with brands will also work in Flipkart’s favor.

Myntra closed a series F round in February 2014. Table below shows how much each investor funneled into Myntra.

Investors

Total Amount Paid Incl. Premium

Tiger Global

Rs 31 Crore

IDG Ventures India

Rs 9 Crore

Accel Growth FII

Rs 9 Crore

PI Opportunities Fund – I

Rs 155 Crore

Sofina

Rs 99 Crore

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

    FY12 – FY13*

  FY11-FY12*

YoY Growth (%)

Sales & other income

Rs 2,124,917

Rs 671,614

216

Losses after Tax

Rs 1,347,626

Rs 512,631

162

*Rupees in Thousand

Given that after Series F, there isn’t a lot of equity to play around with, merger with Flipkart is probably the only option (there are very few other options for Myntra to explore a merger synergy with, now that eBay is in bed with Snapdeal)).

What about Myntra Valuation?

No brainer that the merger would be a cash-and-stock deal with Myntra founders getting stake in Flipkart and Flipkart acquiring the vendor/brands/operations of Myntra (though we’d expect Myntra to operate independently)..

Myntra’s last round of funding, i.e. $50mn two months ago was at a valuation of $200mn and unless investors are pushing for another round, the valuation won’t go beyond $250-$275mn.

Having said that, the combined entity might raise another round of funding and that’d mean a valuation of ~$300-$350mn.

What are your thoughts?

Myntra Funding : Timeline

February 2014: $50 mn from Premji Invest, Belgian Private equity firm Sofina and existing investors. At the time it was reportedly valued at $200 mn.

February 2012: $25 mn from Tiger Global, Accel Partners.

November 2010: $14 mn series B led by Accel Partners.

November 2008: $5 mn from NEA- IUV, IDG Ventures, Accel.

Launched in 2007, by IIT alumni Mukesh Bansal, Ashutosh Lawania and Vineet Saxena, Myntra had started out as an online personalised merchandising solution to companies before it revamped to its current model in 2011.

(With inputs from Team NextBigWhat)

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