GROUP 4 PRESENTS

SRUTHI P (145)
RIMJHIM (138)
VASUNDHARA (158)
KAMAKSHI (128)
VENKATACHALAM V (63)
ABHISHEK RAY (148)
2
 Sectoral conditions pre deal

Online retail sales in India from 2009 to 2016

(in billion U.S. dollars)

Sales volume of the most popular categories

Growing at an annual rate of 51 per cent

 TARGET COMPANY DETAILS

From 2007 to December 2010, Myntra.com was in the business of personalization of

products online. The products ranged from T-shirts, mugs, greeting cards, calendars, key
chains, diaries etc. However, in 2010, the company repositioned itself and expanded its
catalogue to retail fashion and lifestyle products.

4
 REASONS FOR THE DEAL
Myntra was struggling Investors not willing to put
with raising funds money in the company

Opportunity to Entry into the

utilize the huge apparel segment
distribution
network of Flipkart

Achieve growth in
Gain Market share
high margin
by keeping
fashion business,
competitors at bay
faster than what
they could do
alone
5
 DEAL FINANCIALS
• Revenue of Myntra-
Rs. 1200 crore
• Revenue of Flipkart-
Rs. 6000 crore

• Myntra valued in the

deal at $330 million
(about Rs 2,000 crore)
• Flipkart valued at over
$2 billion

6
SYNERGY Of FLIPKART-MYNTRA DEAL
• By using common resources as they have common
vendors.
Cost
Optimization • Flipkart also brought in its capabilities in customer service
and technology.

• By Increasing Market share and Becoming more Dominant

• By joining forces, Flipkart and Myntra would realize huge

Operational cost savings on customer acquisition as they basically
Synergy target the same customer and demographic base.

• Combined company would control the major E-Commerce

of India resulting in significant economies of scales
SYNERGY Of FLIPKART-MYNTRA DEAL
• For Flipkart, setting up a huge fashion vertical means
boosting margins, because fashion has the highest
margins - 35 to 40 per cent - among all products sold
Increased online.
Revenue
• Myntra also had its private brands like Anouk, Dressberry
and Roadster, which promise margins as high 60 per cent.

• Flipkart and Myntra had many common investors such as

Accel Partners and Tiger Global
Cost of
Capital • Their merger would concentrate the investments from both
the companies, helping them to reach revenue and
profitability targets much quicker.
SYNERGY Of FLIPKART-MYNTRA DEAL

• For Flipkart, the biggest selling category has been

Gap Filling electronics, but with this deal, the company hoped fashion
will be the biggest within a few months.
STRUCTURE OF THE DEAL
100% Acquisition, Myntra remained as an Individual Entity

Only Mukesh Bansal from Myntra joined the Flipkart board. He headed
the fashion business for Flipkart

Key stakeholders in Myntra have become millionaires with this deal.

All the Myntra employees got the universal stock options. Myntra
continues to hire and expand.

No Investors Exit took Place.

Key stakeholders in Myntra have become millionaires with this deal.

 FLIPKART MYNTRA Indian Online Fashion Retail Market

PLANS POST DEAL Share FY14

• $100 million was planned to be invested in Flipkart fashion

business in coming years. 30% Mayantra
50% Flipkart
• There were enough funds with Flipkart to sustain for long, 20% Other
hence there were no immediate plans for next round of
funding.

• There’s no threat to Myntra’s online fashion dominance by Indian Online Fashion Retail Market
Amazon. Share FY15 (expected)

• Flipkart aims to grow its fashion/apparel business to an Mayantra

extent that it accounts to 30% of their revenue shares. More +Flipkart
than
Other
• Together, Flipkart and Myntra had over 50% share in the 65%
online fashion market in India (Myntra’s current share is
~30%) it was expected that it will grow to 65% till 2015
 FLIPKART MYNTRA
PERFORMANCE POST DEAL
“ Cost synergies are not our priority for this acquisition. It was about
scaling the two businesses to accelerate the expansion of market share in
fashion”

• Flipkart introduced Flipkart first similar to the Amazon’s Prime program, which
company has yet to launch in India

• Myntra started offering 30-40% discount after the infusion. Also, due to the fact
that they were getting funding by Premji Invest.

• All such activities increased revenue of Flipkart’s revenue by fivefold to more than
Rs.11K crore

• But expenses jumped more than five times to Rs 13.5K crore.

 FLIPKART MYNTRA
PERFORMANCE POST DEAL
• To compensate this, they layoff employees and reduced
discounts.

• It tarnished the image of Flipkart for some time, Forbes

Magazine published an article on “Is Flipkart going to be
Another Kingfisher”.

• But they got hold of themselves and presently Flipkart and

Myntra accumulative market share in online retail industry is at
37% only .
SECTORAL CONDITIONS PRE-DEAL
With a compounded When Amazon With Amazon already
annual growth rate ventured into the closing the gap
(CAGR) of 23% for e- Indian market, between itself and
commerce, India sits everybody knew the Flipkart, the additional
in 2nd place. market was set to investment of $3bn
explode. gave a huge boost to
the company.
This is why everyone
is eyeing to capture Amazon had deep
this multibillion dollar pockets and Jeff By now, Amazon was
market with large Bezos had explicitly breathing down the
firms like Amazon mentioned his neck of Flipkart in a
and local players like intentions to capture close second place. It
Flipkart going at each this crucial market. was at this point in
other to take the time, Flipkart’s Myntra
helm. acquired Jabong.
“
Jabong has built a strong brand that is
synonymous with fashion, a loyal
customer base and a unique selection with
exclusive global brands. The acquisition of
Jabong is a natural step in our journey to
be India’s largest fashion platform. We see
significant synergies between the two
companies. We look forward to working
with the talented Jabong team to shape
the future of fashion and lifestyle e-
commerce in India.
- Ananth Narayanan, CEO, Myntra
“
Fashion and lifestyle is one of the biggest
drivers of ecommerce growth in India. We
have always believed in the fashion and
lifestyle segment and Myntra’s strong
performance has reinforced this faith. This
acquisition is a continuation of the group’s
journey to transform commerce in India. I
am happy that we will now be able to offer
to millions of customers a wide variety of
styles, products and a broad assortment
of global as well as Indian brands.
- Binny Bansal, CEO and Co-Founder, Flipkart
FEATURES OF BUYING OF
THE TARGET COMPANY
Myntra and parent Flipkart
together held 60 per cent
share of the online fashion
and lifestyle market in the
country. With the
acquisition of Jabong, the
trio will together command
a whopping 75 per cent.
The purchase was made Myntra is a mass premium
by Flipkart's fashion unit destination brand with a
Myntra, and the strong focus on men’s
combination should help categories (60 percent of its
the company take on customers are men).
increasing competition
from Amazon Fashion in
India.

Private labels (a total of 11
brands) are an important
part of Myntra’s offerings
and have a stack share of 20
percent of its revenue.
Meanwhile, the USP of
Jabong is that it is more
women-centric (60 percent
of its consumers are
women) and it has a strong
portfolio of international
brands. Jabong is also
stronger in certain
geographies such as Delhi-
NCR.
Jabong’s loyal customer base
of 4 million monthly active
users combined with
Myntra’s 11 million
customers and a combination
of some of the most iconic
brands that will be exclusive
to both platforms will be
crucial in capturing the
market from its rivals.
 REASONS FOR THE DEAL
At the end of 2013, the value
of Jabong was as much as
$508 million. In the same
financial year (ending March
2014), Jabong had reported a
sale of Rs 438 crore.
Although the sales witnessed
by Jabong increased to Rs
869 crore in the next financial
year, the value of Jabong
collapsed due to a
combination of a funding
crunch, market share losses,
and leadership issues.
For more over a year, In addition to this, a
PricewaterhouseCooper
GFG has been looking
s investigation
for a buyer for Jabong.
commissioned by
For this purpose, GFG
held discussions with Rocket Internet had
several firms including found anomalies in the
Aditya Birla Group, functioning of Jabong’s
Future Group, and logistics arm GoJavas.
Snapdeal.
REASONS FOR THE DEAL

Flipkart was also Reports have been The acquisition of

facing difficulty in echoing the Jabong is a move to
reviving its growth. possibility that the preserve its position
Also, Flipkart was global giant Amazon as India’s No.1 e-
struggling to protect might just overtake commerce
its top position in a them as the largest marketplace in the
market where marketplace in the face of an onslaught
Amazon was making country. by Amazon India.
rapid growth.
DEAL ATTRACTIVENESS
Jabong offered over Jabong had built a strong The acquisition of
1,500 international brand that was Jabong was a move to
high-street brands, synonymous with fashion, preserve Flipkart’s
designer labels, Indian a loyal customer base and position as India’s
ethnic, sports labels a unique selection with No.1 e-commerce
and more than exclusive global brands. marketplace in the
150,000 styles from The global included face of an onslaught
over 1000 sellers. exclusive access to brands by Amazon India.
like - Lacoste, Timberland,
Swarovski, Forever 21,
Bugatti Shoes, Tom Tailor,
Topshop, and Dorothy
Perkins
 DEAL ATTRACTIVENESS
The USP of Jabong was Jabong was also a Jabong’s loyal customer
that it is more women- stronger in certain base was of 4 million
centric (60 percent of its geographies such as monthly active users and
consumers are women) Delhi-NCR. the customer base of
and it has a strong Myntra was 11 million.
portfolio of international Out of this, there was an
brands. overlap of less than 30%.
Therefore, this increased
the customer reach for
Flipkart.
 DEAL FINANCIALS INCLUDING VALUATION
• At the end of 2013, Jabong was worth as much as €388 Mn (about $508 Mn).

• In late 2014, Jabong was seeking a valuation of around $1.2 Bn billion when it was in talks with
Amazon, which failed over a valuation mismatch.

• Jabong’s revenue was higher than Myntra in 2014-15, but both amassed massive losses due to
discounting. It reported operating losses of INR 426 Cr in FY15

• Jabong was the only loss-making outfit in backers Global Fashion Group (GFG)’s portfolio of ten
companies in the January-June 2015 period.

• In the buyout talks in 2016 Jabong was looking for a $250 Mn and may have settled for even less.
Jabong’s value collapsed because of a combination of leadership issues, market share losses and a
funding crunch.

All the above factors lead to a lower valuation of the Jabong, thereby helping Flipkart (Myntra) to
acquire the firm.
DEAL FINANCIALS INCLUDING VALUATION
Jabong was a very The acquisition price of When Myntra
cheap purchase for $70 million looks like a acquired Jabong, it
Myntra. The deal cost small price to pay for had been valued at
$70 million (Rs470 reducing competition in only around 0.5 times
crore) for a company this important segment. revenue for the year
that was valued at till March 2016.
around $1.2 billion just
two years ago. The fashion and apparel
segment enjoys the
highest gross margins
globally among all e-
commerce business
segments.
SYNERGY IN THE DEAL

Myntra Jabong

Improved GVM
A collective customer base of about 15 million visitors every month,
boosted the alliance’s gross merchandise value (GMV, or the total
value of inventory sold) of about Rs 10,000 crore a year.
SYNERGY IN THE DEAL
Improved product line
International brands like
Forever 21, Dorothy Perkins,
Next, etc. which were earlier
available only on Jabong were
made available to Myntra
users
Higher margins
The introduction of in-house
brands like Mast and Harbour,
Dressberry, Roadster, etc.
(which were Myntra’s
strenght) on Jabong made way
for higher margins capture and
made way for better results
SYNERGY IN THE DEAL
Improved market share
The two hold about 60-70 per
cent share of the branded
apparel market online and along
with parent company Flipkart,
the group was able to enjoy
more than 75 per cent of India’s
total fashion ecommerce traffic
Reduced operational costs
Both portals brought together
their back-end operations and
supply chain for stronger
integration
Jabong also gained access to
access to Myntra Logistics and
Ekart for logistics, thus, improving
the operational efficiency
They also started inter-operability
in technology
SYNERGY IN THE DEAL
Greater pricing power
Discounts on Jabong were
slashed by two-three
percentage points, making the
company's unit economics
positive
Growth in new markets
Geographically, Jabong was
stronger in the NCR region and
that was something that was
leveraged by Myntra.
 SECTORAL CONDITIONS POST DEAL
▪ For Flipkart, the acquisition provided an opportunity for
it to consolidate its position in the high-margin fashion
category
▪ Helped keeping the likes of brick-and mortar retailers
such as Reliance Retail, Aditya Birla and Tata Group at
bay
 SECTORAL CONDITIONS POST DEAL
▪ Indian premier fashion companies became concerned about the
ecommerce giant using its market dominance to dictate terms
and demand higher margins
▪ Arm-twisting them into giving more margins and on the other
hand raising the prices for the consumers would be unfavourable
for the brands
▪ However, Myntra addressed these concerns saying that their goal
was not margins, but growth. It emphasised that relationship with
brands is absolutely paramount and critical to business
 SECTORAL CONDITIONS POST DEAL
▪ E-commerce companies like Limeroad, Voonik, Craftsvilla had a
remarkably relaxed demeanour about the deal.
▪ According to one of these companies, only 2% of the India’s apparel
and lifestyle market ($70-billion industry) is currently online, which
meant that there still is a long way to go.
▪ Fashion has multiple sub-markets where the value and mid-priced
segments command 75% of the market where Myntra and Jabong
don’t have a paly.
 SECTORAL CONDITIONS POST DEAL
▪ The remaining is split between the premium and luxury
segments. Therefore, they did not see the deal making much of
a difference to them
▪ So-called ‘horizontal’ ecommerce companies like Amazon and
Snapdeal would feel the pressure more
▪ According to a senior business analyst, smaller marketplaces
like LimeRoad and Voonik have a differentiated play and the
Myntra-Jabong deal is unlikely to change their market shares
much.
LEGALITIES AND ANY OTHER LEGAL ISSUES
▪ Will Competition Commission of India (CCI), the country's antitrust regulator
okay the deal??
▪ If the acquired entity has an asset base of less than Rs 350 crore or
turnover of less than Rs 1,000 crore, the acquisition of such an entity is
exempted from Section 5 of the Act for five years from the date of
notification
▪ CCI’s combination laws say if the total assets of the combined entity in India
exceed Rs 2,000 crore or their total annual turnover is more than Rs 6,000
crore, it would trigger a scrutiny
▪ According to a former head of merger control at the CCI, since Jabong’s
asset base and turnover were lower than the requisite thresholds, CCI
scrutiny is unlikely to be triggered
LEGALITIES AND ANY OTHER LEGAL ISSUES
▪ Although the combined entity will have a 70% market share in the
online apparel shopping segment, its overall share of the market
(including physical stores) will be significantly smaller
▪ According to the competition head at a law firm the deal will need
CCI's permission but getting clearance will not be a concern as the
combined market share of the entity will be very less when
compared with brick-and-mortar companies
▪ According to another expert, the deal does not mandate any
regulatory intervention as it not likely to have any serious
competitive impact as there are many other players in the market
RESULTING ENTITY PERFORMANCE
▪ Jabong retained its individuality despite the takeover
▪ Both Flipkart and Jabong organised separate sales during the festive
season of 2016
▪ Encouraging shoppers to ‘Be you’, the company, Jabong launched an
extensive ad campaign to popularise the sale
▪ 50% month-on-month growth in revenues during the month of
October, closing the month with positive unit economics for the first
time in its history
▪ Introduction of some Myntra brands on Jabong made way for higher
margins capture and hence, better results. The older customers of
Jabong also started returning
10% increase
Average Order Value of Jabong

40% increase
Jabong App Installation

15.5 million
Items sold across three platforms
RESULTING ENTITY PERFORMANCE
(March 2018)
Customer Base
As on March 2018, the
combined entity had a
combined base of 12 million
customers, a small subset of
the 100 million customers
claimed by parent Flipkart
Differentiation
Increased differentiation between
the two brands in order to win
new customers. Myntra was
planning to continue to focus on
the mass premium fashion
segment where it has emerged as
the leader, while Jabong would
begin to focus more on luxury and
global brands
RESULTING ENTITY PERFORMANCE
(March 2018)
Offline stores
Myntra opened its first offline
store for its in-house brand
Roadster in Bengaluru and also
operated stores for Barcelona-
based fashion brand Mango in
India. This focus on in-house
brands along with partnerships
with global brands is driving
Myntra’s margins up.
Positive EBITDA
The company had said it will
become profitable at an EBITDA
level by March 2018, with its
private label business which
accounts for about a quarter of
its overall revenues, turning
profitable sometime last year
RESULTING ENTITY PERFORMANCE
(June 2018)
End of Reason Sale
The company claims that the
eighth edition of their End of
Reason Sale (EORS) has been
the biggest sale till date for
Myntra and Jabong, recording
47% year-on-year growth and
8x growth over regular
business days
New Customers
Flipkart-owned Myntra and Jabong
added five lakh new customers to
its platform.
This was achieved through
services like early access (where a
customer could pay Rs 199 and
have access to the selection prior
to the sale), a referral programme
and an expanded catalogue of
products.
RESULTING ENTITY PERFORMANCE
(June 2018)
Flipkart-Walmart Deal
DEAL STRUCTURE

 Walmart will pay $16 bn for

77% controlling stake in
Flipkart.
 Investment includes $2 bn of
fresh equity by Walmart
 The Deal values Flipkart close
to $21 bn.
 Remainder of ownership held
by Flipkart’s existing
shareholders, including Flipkart
co-founder Binny Bansal,
Tencent
DEAL STRUCTURE
 Sachin Bansal will exit the firm
 Current CEO Kalyan
Krishnamurthy will continue as
CEO after the Deal. Most of the
leadership team member will
remain the same.
 Walmart to maintain Best price
as distinct brand.
 Final board member once
elected will continue to
maintain Flipkart's core values
and entrepreneur spirit.
 Walmart supports Flipkart’s
ambition to transition into a
publicly-listed, majority-
owned subsidiary in the future
though immediate focus will
be growing business.
SECTOR ANALYSIS
India Is a Compelling Growth Market with Long-term Potential

9.4% 443M 35%

GDP CAGR over Millennials plus Percentage of population
past 10 years1 393M Generation Z, using internet3; 2nd largest
or 66% of the population2 internet market globally

79% 58%
Mobile percentage of internet Estimated smartphone
traffic, vs. global average of penetration by 2020 vs.
50%4 30% in 20175
India e-Commerce Projected to Grow 4x Faster Than Total Retail
over Next Five Years

India’s eCommerce vs. Total Retail Growth1

Total Retail: eCom:

’18-23E
CAGR ~9% 4x ~36%
7%
6.2%
6%
eCommerce Penetration

5%

4%
2.1%
3%
1.8% 1.8%
2%
1.0%
1% 0.3% 0.4%
0.2%
0% //
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY23E
Why Flipkart?
 India e-Commerce Projected to Grow 4x Faster Than Total Retail
over Next Five Years

Attractive Market & Growth Opportunity One of the world’s largest and fastest growing markets
Market

Accelerating eCommerce Environment eCommerce growing 4x faster than retail industry

The Local Leader $7.5 billion1 annual GMV and 54 million active customers

Experienced & Committed Management Team Management with strong in-country expertise
Flipkart

Strong Partnerships Strong shareholder partners with successful track records of investments in Asia

Creating Value for all Stakeholders Long-term value for shareholders, associates, Indian economy & communities
 India e-Commerce Projected to Grow 4x Faster Than Total Retail
over Next Five Years

Fashion Mobile Electronics

Flipkart Group
Category Rank by
GMV Share #1 #1 #2

Large Appliances

#1
 Flip-kart Group Is Positioned for Significant Growth

Gross Merchandise Value ($M)1 Active Customers (M)2

$7.5B1
$7.5B 54M Annual GMV

54M
Active customers

261M
Units sold in FY18

FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18

Myntra and Jabong

Deal Attractiveness
 STRATEGIC ADVANTAGE
India’s Retail Landscape Derives support from
Flipkart’s Ecosystem

Myntra and Jabong Technology that digital

India's leading online consumers trust
fashion destination

Logistics arm Ekart -

500k deliveries every
day
Exclusive Mobile
Flipkart controls
significant share in PhonePe app facilitates
seamless payments
Online Mobile phone
market
Walmart-Amazon Problem
 Walmart revenue last year was
$500 bn whereas for Amazon
it was $177 bn. Yet Market cap
of Amazon is $680 bn vs $250
bn for Walmart.
 Today, Amazon is second most
valuable company
 Investors consider Amazon
has more robust future and
growth potential
▪ Amazon is already successful
in many foreign country but
Walmart doesn’t good record
in outside countries.
▪ India is the only big
ecommerce market still up for
grabs. India’s online retail
market grew at 23 percent in
2017. While India’s overall
retail market is over $670
billion in size, online sales is
just at $20 billion.
Walmart’s India Problem

 Walmart is in India for last 10  Walmart had a partnership with

years without any success. Bharti Enterprises, but that never
scaled up and the partnership ended
 India doesn’t allow more than
in 2013.
51% FDI in multi –brand retail.
 They are an iconic brand, have the
 But it allows 100% FDI in
cash and the market cap, but have let
wholesale
others dominate the market,
 Walmart s operates 21 Best especially in markets other than the
Price wholesale stores in India, US. Unless they do something drastic
but has no presence in retail they will lose India too.
 Walmart now realises that an offline-
only play might not happen in India
Financial Impact
Financials

 Walmart will finance the  Walmart expects a negative impact

investment with a combination to FY19 EPS of approximately $0.25
of newly issued debt and cash to $0.30,
on hand.  This includes incremental interest
 Flipkart’s financials will be expense related to the investment
reported as part of Walmart’s
International business
segment.
Financials
 In FY20, as Walmart look to  Tax benefit is considered very
accelerate growth in this minimum .
important market, Walmart  Interest expense of approximately
anticipates an EPS headwind in $0.15 per share.
total of around $0.60 per share
due to  Walmart is expecting to reach break-
even and earn profits in medium to
 Operating losses of long term
approximately $0.40 to $0.45
per share
 This amount includes about
$0.05 per share related to
amortization of intangible
assets and depreciation
Synergy
Expected synergies

 Walmart’s standalone revenue- $0.5 billion versus $500 billion global

revenue
 Walmart not relatively successful in Technology where Flipkart’s
competency lies
 Access to huge Indian market where only 2.5% of total retail is happening
through e-commerce
 Business growth through support of 5-6 million kirana
Sectoral Conditions
post deal
Possible scenarios

 .Alibaba-Softbank M&A
 Two Big Players with multiple niche vertical players
 Reliance Industries venturing into e-commerce with support from Future
group
Legalities and legal
issues associated
Legal Issues and Options

 Competition Commission of  Walmart backing out of deal

India (CCI) is yet to approve the
 Renegotiate the deal at lower
deal
valuation
 There are 3 options present
 To challenge CCI ruling in courts
on Walmart’s side
Current scenario of shareholders

 No investors have exited yet

 Once the deal is done, there would be multiple share purchase agreements
 Even CCI blocks the deal, no major impact on transactions
History of international Walmart deal

 In 2010, Walmart striked a deal with Massmart for 51% acquisition at an

value of 16.5 billion rand
 Competition Commission of South Africa approved the deal in the first
place as protest happened from retailer’s side.
 South Africa’s Competition Tribunal gave its nod under two conditions
 Setting up 100 million rand supplier development fund
 No merger related retrenchments for 2 years
 Walmart accepted the conditions
 CCI may take a cue from Competition Tribunal of South Africa’s verdict
Resulting entity’s expected
performance post deal
 Expected Performance
 Walmart expects a negative impact to FY19 EPS of approximately $0.25 to
$0.30, which includes incremental interest expense related to the
investment.
 In FY20, Walmart anticipates an EPS headwind in total of around $0.60 per
share, comprised of Operating losses of approximately $0.40 to $0.45 per
share, assuming minimal tax benefit for the losses in the near to mid term.
 Interest expense of approximately $0.15 per share.
 In the mid to long term, as the business scales and efficiencies are
realized, Walmart expects losses to decline and returns to improve.
 Given Walmart’s financial strength, they anticipate the continuation of our
current share buyback program.
Other Issues
 CAIT Protest
 BJP led Government opposed FDI in multi-brand retail
 But no resistance towards Walmart Flipkart deal
 Traders protest mentioning that it is an “unethical deal”
 Irony is that Amazon is operating in e-commerce
 Retailers fear on Walmart is due to its strong supply chain and efficient
retail business
 “Walmart entered India for destroying retail and not e-commerce”
 Meanwhile, CAIT is demanding formation of regulatory body for e-
commerce sector
 Walmart taking time

 Time till June 7th, 2019

 But they are confident to complete before end of 2018
 Started releasing bond worth of entire deal amount to raise funds
 Walmart stressing the fact that their relevant market iss “Pan-India
market for B2B sales”
Thank you