Myntra weighing competing offers to raise over Rs 300 crore

BANGALORE: The board of directors at online fashion retail portal Myntra is considering offers from two competing groups of investors eager to back the ecommerce firm. The proposed deal will be over Rs 300 crore, said two people with direct knowledge of the discussions.

One consortium is led by Wipro Chairman Azim Premji’s family office Premji Invest, along with L Capital Asia — the private equity arm of global fashion retailer LVMH Group— and Sofina, a Belgium-based investment firm. ET was not able to ascertain the identity of the second group also bidding for a stake in the seven-year-old firm started by three alumni of IIT-Kanpur.

The company’s cofounder and CEO Mukesh Bansal declined to comment on the ongoing negotiations.


“While the investment from Premji Invest, L Capital and Sofina is in the final stages, the company has got a rival offer that is quite attractive. Hence the debate within the board,” said a person privy to the discussions, who did not wish to be identified.

An investment advisor said Myntra could attract valuations of over six times revenue. The apparel retailer had sales of Rs212.4 crore in fiscal 2013 when it reported a loss of Rs134.7 crore after tax, according to documents accessed by ET from the Ministry of Corporate Affairs' website. It expects to reach a turnover of Rs800 crore in fiscal 2014 and be profitable by the end of this year, according to cofounder Mukesh Bansal.

The tide seems to be turning for the leaders in India's ecommerce industry. Last year market leader Flipkart raised about Rs2,250 crore from a consortium that valued the company at $1.6 billion (Rs10,000 crore). Another online marketplace Snapdeal raised about Rs300 crore.

If the latest investment in Myntra is successful, it will be the second deal in an Indian e-commerce firm for Belgium's Sofina, which co-invested in Flipkart last year.

“Sofina does not comment on potential changes in its portfolio of investments,” said Wauthier de Bassompierre, general counsel for Sofina, in an email response to ET. Emails sent to Premji Invest and L Capital did not elicit replies.

Myntra has so far raised about Rs 470 crore in multiple rounds, mainly from Tiger Global and Accel Partners, who will participate in this latest round of funding as well. Kalaari Capital and IDG Ventures were two early investors in the firm but it is unclear if they will remain invested in the company.

“Serious money is now backing the serious players in the industry,” said Raja Lahiri, a partner at financial advisory firm Grant Thornton India. “I don’t see investments going up across the sector. Only the leaders who have created a name for themselves will attract capital.” Premji Invest and L Capital have a track record of backing fashion and apparel companies. In 2012, the two investment firms bought a minor holding each in Indian ethnic retail chain Fabindia. L Capital Asia has also invested in Genesis Luxury Fashion, which markets top luxury brands in India, including Jimmy Choo and Armani. Its parent LVMH has a stake in bags brand Hidesign.

The funding in Myntra comes at a time when Flipkart has stepped up competition in the online fashion retail category. Flipkart, which sells products across categories like books, electronics and jewellery, recently launched a private label fashion brand as well. “Fashion provides better margins and is a better hook than electronics to attract customers,” said Ashish Jhalani, founder of eTailing India, a firm that tracks the online retail industry.

While electronics provides less than 10 per cent margins for ecommerce firms, branded apparel gets them up to 45 per cent. Private labels bring in even higher margins of about 60 per cent, for Myntra this segment contributes about a fifth of total revenue. “Myntra has managed to retain its leadership position in fashion,” said Jhalani. “This funding will help Myntra strengthen its leadership position.”