Background of Companies:
Flipkart: Flipkart was founded in 2007 by Sachin Bansal and Binny Bansal. It operates in the e-commerce industry and is headquartered in Bangalore, India. The company has attracted significant investment from key investors, including Tiger Global, Naspers, Accel Partners, DST Global, and SoftBank. In 2013, Flipkart's revenue was approximately $1 billion.
Myntra: Myntra was founded in 2007 by Mukesh Bansal, Ashutosh Lawania, and Vineet Saxena. It specializes in fashion e-commerce and is also headquartered in Bangalore, India. Myntra has received investments from prominent investors such as Accel Partners, Tiger Global, and IDG Ventures. In 2013, Myntra's revenue was approximately $70 million.
Reasons for acquisition:
Market Leadership: Flipkart aimed to consolidate its market leadership by acquiring Myntra, a leading player in the fashion segment. This strategic move was intended to strengthen Flipkart's dominant position in the Indian e-commerce market.
Strategic Fit: Myntra’s strong presence in the fashion industry complemented Flipkart’s broad e-commerce platform. The integration of Myntra's specialized fashion offerings with Flipkart's extensive product range created a more comprehensive online shopping destination.
Competitive Pressure: The merger was also a strategic response to counter the rising threat from Amazon India and other emerging competitors. By joining forces, Flipkart and Myntra could better compete with global giants in the rapidly growing Indian market.
Customer Base Expansion: Acquiring Myntra provided Flipkart with access to Myntra’s loyal customer base and strong brand equity in the fashion segment. This expanded customer base enhanced Flipkart’s market reach and potential for increased sales.
Technology and Talent: The acquisition brought Myntra’s advanced technology and expertise in fashion e-commerce into Flipkart’s fold. This integration of technology and talent was crucial for innovation, improving user experience, and maintaining a competitive edge in the e-commerce landscape.
Why did Myntra agree?
- Myntra's market share before the acquisition was only 30% of online fashion sales, but it soared to 50% after Flipkart acquired it in a market growing at 100% annually.
- The acquisition benefited both Flipkart and Myntra: Flipkart gained a leading position in online fashion, while Myntra's sales received a boost from Flipkart's capital injection.
- Flipkart capitalized on Myntra's undervaluation and financial strain, acquiring it at a competitive price.
- Myntra, facing a cash burn phase, greatly needed Flipkart's capital infusion to survive.
- Myntra explored options like going public but found being acquired by Flipkart more feasible.
Pre and Post comparisons:
| Aspect | Flipkart (Pre-Acquisition) | Myntra (Pre-Acquisition) | Combined Entity (Post-Acquisition) - 2024 |
| Revenue (FY 2013) | $1 billion | $70 million | $8.2 billion (combined) |
| Market Share | Leading in e-commerce | Leading in fashion e-commerce | Dominant in overall e-commerce |
| GMV | Over $1 billion | N/A | $4 billion |
| Registered Users | Over 15 million | N/A | Over 475 million |
| Monthly Visitors | N/A | 9 million | Over 260 milliom |
| Growth Rate | 100% (year-on-year) | 50% (year-on-year) | 31% (year-on-year) |
Synergies created:
Cross-Selling: Potential for cross-selling fashion products to Flipkart's existing customer base and vice versa.
Cost Optimization: Combining resources and streamlining operations could lead to cost savings.
Enhanced Negotiation Power: Increased bargaining power with suppliers due to larger order volumes.
DISCLAIMER: This blog is solely for educational purposes and not to offer any investment advice. Please do your own research or consult a financial advisor before making any investment decisions.
Comments