E Commerce

Snapdeal closes on to seal the Jabong deal

By Rishabh Sharma

August 24, 2017

The race to acquire fashion e-tailer Jabong finally seems to be coming towards an end as e-commerce company Snapdeal sealing the deal. “The term sheet is almost ready with Snapdeal’s legal team visiting Jabong’s office in Gurugram,” the Financial express reported on Saturday.

The position of online fashion portal Jabong in the e-commerce market has been in jeopardy ever since its sales clamped down in 2014. Despite narrowing its losses the following year, the company has found it difficult to generate investment with its two primary investors- AB Kinnevik and Rocket Internet, showing hesitation to infuse fresh capital into the sinking e-commerce fixture. The company has been on a lookout for buyers from the last one year and held talks with many e-commerce fashion fixtures. Aditya Birla group’s fashion portal abof.com, Flipkart, Snapdeal, Future group and Chines firm Alibaba were the initial interested companies but majority of them backed out early. The asking price is said to be $250-300 million but the deal size could be lower, suggests the reports.

Back in 2014 Jabong matched its online fashion rival Myntra’s sale charts and was expected to lead the online fashion market the following year. But its sales dropped drastically in the final quarter of the year and company had to bear major financial setbacks owing to that. While Myntra’s parent body Flipkart invested heavily in its advertising and brand management, Jabong suffered due to lack of funding from its investors.

However, Jabong narrowed down its gross loss to Rs 46.7 cr for 2015 on the back of lower levels of discounts from Rs 159.5 cr in 2014. Its net revenue rose 7.1 percent to Rs 869.1 cr in 2015 compared with Rs 811.4 cr in 2014. In January 2016, the company finally seemed to be back on track by registering a staggering month on month growth of almost 35%.

Company’s two key investors Rocket Internet and AB Kinnevik took notice of the company’s deplorable state and in September 2014 initiated a global move in to put all its fashion e-commerce brands under one brand called Global Fashion Group (GFG). Both investors invested a whopping $300 million into GFG to provide a much needed fund cushion to Jabong. However, the valuation of GFG slid from €3.1 billion in July 2015 to €1 billion after barely 10 months. Rocket Internet recently pumped in $20 million to survive the company but seems reluctant for further investments.

The exodus of senior management also has been a major concern for the company. Recently company CPO Saurabh Goel called it quits after 8 months of association with the company. Rumours were rife that company CEO Sanjeev Mohanty would leave the company as well to be the new head of denim wear giant Levi’s India branch. However, Mohanty has put rumours to rest by announcing his continued association with Jabong.

Executives from Rocket Internet and Kinnevik are currently in India to oversee the sale. Though no official statement has been released from Snapdeal’s office regarding the deal, the deal, if it takes place, would be the biggest takeover in the fashion e-commerce sector since Flipkart’s takeover of Myntra in 2014.