 "Fashion turns red hot in Indian e-commerce as Jabong becomes a Rs 21,000 cr global giant")
Fashion etailer Jabong just turned into a global giant with its investors German venture capital group Rocket Internet and with Swedish investor Kinnevik announcing a merger of five emerging market fashion start-ups. The merged entity would be named Global Fashion Group (GFG) and worth about worth 2.7 billion euros or around Rs 21,000 crore, according to media reports.
According to a Reuters report, Rocket Internet and Kinnevik, which holds an 18 percent stake in the Berlin-based firm, are combining Lamoda in Russia, Dafiti in Latin America, Jabong in India, Zalora in south-east Asia and Namshi in the Middle East.
“We are delighted to have joined forces and have created a global fashion giant which is active in four continents. This will lead to an even better experience for us internally but also for our customers. We can rely on common sourcing, outstanding IT competencies and our experiences with private labels,” Praveen Sinha, managing director of Jabong, was quoted as saying in a report in The Economic Times.
The move highlights the importance of fashion in the Indian e-commerce sector. Earlier this year, Flipkart had merged fashion etailer Myntra with itself. The move was aimed at strengthening their foothold in the sector where global giants, like Amazon, are upping the game.
According to analysts quoted in reports, fashion is the fastest growing segment, where the competition is also fierce. The ET report cites an Accel Partner report which sees 400 percent growth in three years from $559 million to $2.81 billion by 2016.
“There is merit in consolidation in this space, as it helps in doing common sourcing for trends and brands that are similar across various countries,” Anand Ramanathan, an associate director at consulting firm KPMG, has been quoted as saying in a report in the Mint.
The merger will help Jabong raise the much needed capital to take on the Flipkart-Myntra combine, which had recently raised $1 billion. Amazon had also said it would invest $2 billion in India.
According to Reuters, the move precedes the initial public offering of Rocket Internet in Frankfurt.
The transaction is expected to close in late 2014 and it was not immediately clear what impact the move would have on Rocket Internet’s plans for an initial public offering, which had been expected in coming weeks after Zalando, the European e-commerce firm it also helped launch, announced it planned to list soon.
The five companies to be combined had 4.6 million active customers and over 7,000 employees as at June 30. Their websites received 8.4 million orders and generated 436 million euros ($573 million) of gross merchandise volume in the first half.
Since launching in 2011 and 2012, the five have attracted more than 1 billion euros in funding from investors including Kinnevik, Access Industries, Summit Partners, Verlinvest, Ontario Teachers’ Pension Plan and Tengelmann and still have about 350 million in cash as of June 30.
All direct and indirect shareholders will contribute their shares into a newly formed Luxembourg-based entity, with the three largest shareholders in the new group to be Kinnevik with 25.1 percent, Rocket with 23.5 percent and Access Industries with 7.4 percent.
With input from Reuters
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