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Flipkart Leads India’s e-Commerce Market, Acquires Myntra

Posted on Thursday, May 29th 2014

Forrester estimates the Indian e-commerce market to be worth $13 billion last year. The Indian e-commerce market was dominated by travel which accounts for 70% of consumer e-commerce transactions. But retail is catching up as well. Forrester’s report estimates online retail sales to be worth $1.6 billion last year. Analysts estimate the online retail market to grow to $3.1 billion during this year and to grow seven times in the next five years.

Flipkart’s Financials
Bangalore-based Flipkart is the largest e-tailer in India with more than 18 million registered users of which nearly 3.5 million are daily visitors. As of February this year, Flipkart had clocked $1 billion in annual Gross Merchandise Value (GMV) of transactions conducted on their website. The company had initially planned to hit that milestone in 2015. Flipkart had recorded a GMV of $10 million back in 2011, four years after their inception. The $1 billion mark was definitely achieved at a much faster rate. The high GMV is yet to turn into profits. Flipkart is estimated to have recorded a loss of Rs 281.70 crores (~$3.9 million) in 2013.

But the continued losses have not hurt either venture funding or valuations. Till date, they have raised $750 million in funding from Tiger Global Management, Naspers, Accel Partners, Iconiq Capital, and DST Global. Their last round of funding was held last week when they raised $210 million in a round led by DST Global at an undisclosed valuation. In July last year, analysts had valued Flipkart at $1.6 billion.

Flipkart’s Myntra Acquisition
Besides market expansion, Flipkart has also been using their funds for acquisitions. Earlier this month, they announced one of the biggest acquisitions in the e-tailing market in India. Flipkart bought Indian online fashion retailer Myntra for an estimated $300 million. Myntra retails products from more than 650 brands including Adidas, Calvin Klein, and Levis and has a GMV of about $200 million. Myntra has plans to become a Rs. 20,000 crore e-tailer (~$3.3 billion) by the year 2020.

Analysts believe that the acquisition will not only help Flipkart expand presence in the fashion segment, but also compete with giants like Amazon and eBay. Amazon is pushing their presence in the Indian market by expanding advertising, product categories, and services like next day delivery. Additionally, Flipkart will benefit from the comparatively higher margins that online fashion retailing generates. Researchers estimate that the online fashion segment earns more than 35% in operating margins. Flipkart has talked about their commitment to the apparel segment and plans to invest an additional $100 million into Myntra to drive further expansion.

Analysts are also speculating that the improved financial and market presence through the acquisition may ultimately help Flipkart prepare for a listing either in the US or Singapore stock exchanges. Flipkart has no definite plans of an IPO, but in an interview in December last year, founder Sachin Bansal had suggested that they would probably look at an IPO in a year.

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