Beruflich Dokumente
Kultur Dokumente
(Submitted for the Degree of B.Com. Honours in Accounting & Finance under the
University of Calcutta)
Submitted by :
Name of the Candidate :
Registration No. :
Roll no. :
Name of the College :
College Roll No. :
Supervised by :
Name of the Supervisor :
Name of the College : Seth Anadram Jaipuria College
Signature :
Name :
Name of the College : Seth Anandram Jaipuria College
Place: Kolkata
Date:
STUDENT'S DECLARATION
I hereby declare that the Project Work with the title “A STUDY BASED ON
ACQUISITION OF MYNTRA BY FLIPKART” submitted by me for the partial
fulfilment of the degree of B.Com. Honours in Accounting & Finance under the
University of Calcutta is my original work and has not been submitted earlier to any
other University /Institution for the fulfilment of the requirement for any course of
study.
I also declare that no chapter of this manuscript in whole or in part has been
incorporated in this report from any earlier work done by others or by me. However,
extracts of any literature which has been used for this report has been duly
acknowledged providing details of such literature in the references.
Signature :
Name :
Registration No. :
University Roll No. :
College Roll No. :
Place: Kolkata
Date:
ACKNOWLEDGEMENT
It is my proud privilege to express the feeling of gratitude to all the people who has
helped me directly or indirectly to conduct this project work.
I owe a deep sense of gratitude to my teacher and my faculty guide Prof. , professor
at Seth Anandram Jaipuria College, Kolkata.
Without all these support it wouldn’t have been possible on my part to complete the
project report. I will always be indebted to them.
CONTENTS
1. Introduction 1-5
4. International Scenario 10
7. References 26
GRAPH INDEX
1. INTRODUCTION
"Acquisition" usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a
smaller firm will acquire management control of a larger and/or longer-established company and
retain the name of the latter for the post-acquisition combined entity. This is known as a reverse
takeover. Another type of acquisition is the reverse merger, a form of transaction that enables a
private company to be publicly listed in a relatively short time frame. A reverse merger occurs when
a privately held company (often one that has strong prospects and is eager to raise financing) buys
a publicly listed shell company, usually one with no business and limited assets.
There are also a variety of structures used in securing control over the assets of a company, which
have different tax and regulatory implications:
The buyer buys the shares, and therefore control, of the target
company being purchased. Ownership control of the company in
turn conveys effective control over the assets of the company, but
since the company is acquired intact as a going concern, this form
of transaction carries with it all of the liabilities accrued by that
business over its past and all of the risks that company faces in its
commercial environment.
The buyer buys the assets of the target company. The cash the target
receives from the sell-off is paid back to its shareholders by dividend or through liquidation. This
type of transaction leaves the target company as an empty shell, if the buyer buys out the entire
assets. A buyer often structures the transaction as an asset purchase to "cherry-pick" the assets that
it wants and leave out the assets and liabilities that it does not. This can be particularly important
where foreseeable liabilities may include future, unquantified damage awards such as those that
could arise from litigation over defective products, employee benefits or terminations, or
environmental damage. A disadvantage of this structure is the tax that many jurisdictions,
particularly outside the United States, impose on transfers of the individual assets, whereas stock
transactions can frequently be structured as like-kind exchanges or other arrangements that are tax-
free or tax-neutral, both to the buyer and to the seller's shareholders.
The terms "demerger", "spin-off" and "spin-out" are sometimes used to indicate a situation where
one company splits into two, generating a second company which may or may not become
separately listed on a stock exchange. An increase in acquisitions in the global business
environment requires enterprises to evaluate the key stake holders of acquisition very carefully
before implementation.
Levy, H., & Yoder, J. A. (1993), examined the behaviour of option implied standard deviations
around merger and acquisition announcements. The implied standard deviations of target firms
increased significantly three days prior to the announcement. The analysis was extended to the
equity market to determine which market reacts first to the merger or acquisition announcement.
Target firm equity abnormal returns and residual variances increased significantly one and two
days, respectively, prior to the announcement.
Baoxian, Zhu, and Wang Yikai (2002), analysed different buyers' position (state owned or
privately owned), and different methods of transfer accounts (paid or without paid), and different
results reached respectively in M&A. The conclusions were: Companies with bad performance were
more willing to sell share than those with good performance. Most of the M&A were strategic, and
the main motive force to M&A is to be on the list. The main businesses of the corporations were
strengthened after M&A. Compared with other forms, marketed and strategic M&A, and
compensated M&A can have better effect.
Auster, Ellen R., and Mark L. Sirower (2002), stated that the past two decades have witnessed
the largest merger and acquisition (M&A) waves in history. Yet, the empirical evidence suggested
that the perceived financial benefits of M&A often were not realized for corporate acquirers. A
three-stage conceptual framework was built to illuminate the dynamics of this merger and
acquisition wave activity and to help in explaining the frenzied persistence of this phenomenon
despite poor performance results.
2. Sources of data Secondary Data: Secondary Data was collected from old
research papers various e-journals, books, websites,
whitepapers, newspapers and some of the governmental data
etc.
3. Period of study The study took nearly 3 months to complete (November, 2017
to February, 2018)
4. Methodology used For generation of data- Secondary data from journals, books
etc., on the basis of which the study has been developed.
For presentation of data- Different tables, bar chart, pie chart
has been used.
For analysing the data- Descriptive statistics have been used.
2. CONCEPTUAL
FRAMEWORK
Mergers and Acquisitions speak to a definitive in change for a business. No other occasion is more
troublesome, testing, or confused as a merger and securing. Moving over to the quickest developing
and striking on the position of third biggest economy, Indian e-trade has advanced altogether in the
most recent decade, and there are numerous parts of e-business like Tele shopping, internet
shopping and portable, which are all part of what is computerized business took after by
Flipkart.com, Snapdeal.com, Jabong.com and Myntra.com; real players on the ground. eBay
entered India nine years ago through the acquisition of Baazee.com, and five years prior to that was
the start of organized retail in India. So, it is about 15 years old. What is interesting though in India
is that the entire evolution of e-commerce happened in over 15 years whereas in advanced markets
like the U.S., it took over 50-60 years.
HISTORY OF FLIPKART
Flipkart was founded on 2007 by Sachin Bansal and Binny Bansal, both alumni of the Indian
Institute of Technology Delhi. They worked for Amazon.com, and left to create their new company
incorporated in October 2007 as Flipkart Online Services Pvt. Ltd. Flipkart started by selling books
online and popularized the idea of buying books online in India. Flipkart now employs more than
33,000 people.
In October and November 2011, Flipkart acquired
the websites Mime360.com and Chakpak.com.
Flipkart moved to market place model in feb 2013
where third-party merchants sell goods to shoppers
through Flipkart site. It allows e-commerce
companies to scale up faster & save storage & other inventory related cost as the products are held
by merchants. 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 online.
HISTORY OF MYNTRA
Myntra was established in 2007 by Mukesh Bansal along with Ashutosh Lawania and Vineet
Saxena, Myntra was in the business of on-demand personalization of gift items. It mainly operated
on the B2B (business-to-business) model during its initial years.
Between 2007 and 2010, the online portal allowed customers to
personalize products such as T-shirts, mugs, mouse pads,
calendars, watches, teddy bears, pendants, wine glasses and
jigsaw puzzles.
In 2011, Myntra expanded its catalogue to include fashion and
lifestyle products and moved away from personalization.
Myntra tied up with various popular brands to retail a wide range of latest merchandise from these
brands. Myntra offered products from 350 Indian and International brands by 2012. Myntra also
had casual wear for men and women from brands. In 2014, Myntra's portfolio included about
1,50,000 products of over 1000 brands ranging from international brands to designer brands and
distribution area of around 9000 pin codes in India.
industries where future growth is unlikely. It should be noted that traditional financial
management does not always support diversification through mergers and acquisitions. It is
widely held that investors are in the best position to diversify, not the management of
companies since managing a steel company is not the same as running a software company.
Short Term Growth-Management may be under pressure to turnaround sluggish growth
and profitability. Consequently, merger and acquisitions are made to boost poor
performance.
Undervalued Target-The Target Company may be undervalued and thus, it represents a
good investment. Some mergers are executed for "financial" reasons and not strategic
reasons.
July 2016 saw a major consolidation in the cement sector by way of ‘slump exchange’ when
the cement capacity of 21.20 million tonnes per annum owned by Jaiprakash Associates
Limited (a part of the Jaypee Group) was transferred to Ultratech Cement Limited, (the
flagship cement arms of the Aditya Birla Group) for 2.4 billion USD (16,189 crore INR).
Last year, India’s largest oil producing company, Cairn India Limited (Cairn), merged with
the metals and mining giant Vedanta Limited (Vedanta) in an all-share deal amounting to
2.5 billion USD, whereby the public shareholders of Cairn would be allotted equity and
preference shares of Vedanta.
3. DATA PRESENTATION
AND ANALYSIS
Flipkart and Myntra did not disclose the details of the deal, but analysts estimate that Myntra has
been valued at about ₹2,000crore ($330 million). The impending deal was first reported by TOI in
January this year. This is the biggest M&A deal in India's e-commerce story to date, surpassing the
$100 million that the Ibibo Group spent to buy RedBus, again a story which first broke on this
newspaper in June last year.
As part of the acquisition, Myntra co-founder Mukesh
Bansal will join Flipkart's board and will also oversee
Flipkart's fashion business. Flipkart and Myntra will
remain as two separate entities, but people holding stock
options in Myntra will now hold the same in Flipkart.
The current deal appears to be win-win for both
companies, and could be the making of a giant company,
better positioned to address India's growing demand for online retail-one that could put up strong
competition against rivals Flipkart, which also operates under the marketplace model allowing
retailers to offer products on its platform, has since its inception raised over $500 million. Common
investors such as early-stage investor Accel Partners and investment fund Tiger Global are expected
to remain invested in Myntra, as also recent investor Premji Invest, which participated in the
300crore funding round in the fashion portal in February.
The two companies now have three common investors Accel, Tiger and Belgium based family
office Sofina. Myntra's other investors are IDG Ventures India and Kalaari Capital. This giant deal
will not only help to generate revenues for the companies but will also create opportunities for
young talents of India. As industry grows it will require engineering teams, customer agents and
logistic support to meet the demand. Flipkart will increase hiring from 13,000 to 25,000, and out of
this 1,200 will be engineers. The e-commerce firm acquired fashion portal Myntra, according to
source, the later too plans to double its headcounts this fiscal from a team of 500 employee.
5% MYNTRA
10%
40% FLIPKART
20% SNAPDEAL
AMAZON
OTHERS
25%
Fig.3.1.1-Internet
Flipkart+Myntra 70%
Snapdeal 20%
Amazon 10%
Others 5%
Fig3.2-
Fig.3.2 shows the dominance created on fashion segment by Flipkart-Myntra after the deal got
sealed leaving no close competitor in the market and clearing the threat of being overpassed.
5%
10%
15% FLIPKART-MYNTRA
SNAPDEAL
70%
AMAZON
OTHERS
Fig.3.2.1-internet
Fig.3.3 shows the addition or benefits they acquired in terms of users, daily visits, sellers, team
strength just after acquisition. It can be seen clearly how both the companies got the benefit of this
deal.
Registered users
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
Flipkart Myntra Flipkart+Myntra
Fig.3.3.1
Fig.3.3.1 is a graphical presentation of registered users of both the companies before and just after
acquisition as shown in Fig.3.3
Daily visits
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Flipkart Myntra Flipkart+Myntra
Fig.3.3.2
Fig.3.3.2 is a graphical presentation of daily visits on the website of both the companies before and
just after the acquisition as shown in Fig.3.3
Registered Sellers
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Flipkart Myntra Flipkart+Myntra
Fig3.3.3
Fig3.3.3 is a graphical presentation of registered sellers of both the companies before and just after
the acquisition.
Team Strength
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Flipkart Myntra Flipkart+Myntra
Fig.3.3.4
Fig.3.3.4 is a graphical presentation of Team strength of both the companies before and just after
the acquisition
Fig.3.4 shows the fund raised by Flipkart before the acquisition. Flipkart raised fund of total 541
million from different investors from 2009 to 2013 Tiger global and Accel partners being the key
investors.
500,000,000
400,000,000
300,000,000
181,000,000
200,000,000
100,000,000
31,000,000
1,000,000 11,000,000
0
2009 2010 2011 2012 2013
Fig.3.4.1
Fig.3.4.1 is the graphical presentation of fund raised by Flipkart before acquiring Myntra. It shows
how year wise Flipkart raised fund of about 541 Million till 2013.
Fig.3.5-www.businesstoday.in
Fig.3.5 shows the fund raised by Myntra before being acquired by Flipkart. Myntra raised total fund
amounted 115 Million, Tiger global and Accel partners again being the key investor.
100,000,000
80,000,000 65,000,000
60,000,000
40,000,000
40,000,000
19,000,000
20,000,000 5,000,000
0
2008 2011 2012 2013 2014
Fig.3.5.1
Fig.3.5.1 is a graphical presentation of fund raised by Myntra before being acquired by Flipkart.
Myntra raised fund of around 115 Million before the acquisition as shown in the Fig.3.5
July’2014 Tiger Global, Naspers, Accel Partners, Morgan Stanley, DST, 1 Billion
Sofina, GIC, Iconiq
Dec’2014 Dst, Greenoaks, GIC, Baillie Gifford, Tiger Global, T.Rowe 700 Million
Price , Steadview Capital Management, Qatar Investment
Authority, Iconiq
Fig.3.6-www.business-standard.com
Fig.3.6 shows the fund raised after the acquisition. They raised total sum total of nearly 2.6 Billion.
Investors saw the dominance created after the deal and hence were attracted to invest more as they
were expecting to get more return on their investment.
2,500,000,000
1,910,000,000
2,000,000,000
1,500,000,000
1,210,000,000
1,000,000,000
500,000,000
210,000,000
0
May'2014 July'2014 Dec'2014 July'2015 April'2017
Fig.3.6.1
Fig.3.6.1 is graphical presentation of the data presented in Fig3.6 which shows the fund generated
by both the companies after acquisition. It shows a great hike in the investment as it was great deal
and investors knew that it is going to give them great returns.
2,500,000,000
2,000,000,000
1,500,000,000
1,000,000,000
500,000,000
0
Flipkart Myntra Flipkart+Myntra
Fig.3.7
Fig.3.7 is graphical presentation of fund raised by both the companies before and after acquisition.
Flipkart generated fund of 541 Million while Myntra generated fund of around 115 Million and they
together generated fund of around 2.6 Billion.
Fig.3.8 shows the financial statement of both the companies before and after the acquisition. It
shows the financial statement of both the companies for the year 2012-13 to 2015-16. It shows how
the sales figure showed a massive increase after the acquisition and as a result there was a massive
increase in Revenue as well. As the sales and revenue increased Expenses also increased and as
result there was a situation of loss but in 2015-16 the loss figure decreased as compared to past year
so it was a good sign for both the companies.
Net sales
14,000.00
12,857.25
12,000.00
10,000.00
9,351.75
8,000.00
6,000.00
4,000.00
3,246.53
2,000.00
1,393.13
0.00
2012-13 2013-14 2014-15 2015-16
Fig.3.8.1
Fig.3.8.1 is a graphical presentation of net sales of both the companies before and after acquisition.
It shows how the cumulative sales of both the companies increased from 1,393.13 crore in 2012-13
to 3,246.53 crore in 2013-14 before the acquisition and drastically increased to 9,351 crore in 2014-
15 to 12,857.25 crore in 2015-16 after the acquisition
Total revenue
14,000.00
13,177.25
12,000.00
10,000.00
9,536.74
8,000.00
6,000.00
4,000.00
3,387.71
2,000.00
1,393.13
0.00
2012-13 2013-14 2014-15 2015-16
Fig.3.8.2
Fig.3.8.2 is a graphical presentation of Revenue of both the companies before and after acquisition.
It shows how the cumulative sales of both the companies increased from 1,393.13 crore in 2012-13
to 3,387.71 crore in 2013-14 before the acquisition and drastically increased to 9,536.74 crore in
2014-15 to 13,177.25 crore in 2015-16 after the acquisition.
Total Expenses
16,000.00
14,000.00 13,668.13
12,000.00
10,000.00 10,319.53
8,000.00
6,000.00
4,000.00 3,834.71
2,000.00 1,707.76
0.00
2012-13 2013-14 2014-15 2015-16
Fig3.8.3
Fig.3.8.2 is a graphical presentation of Revenue of both the companies before and after acquisition.
It shows how the cumulative sales of both the companies increased from 1,707.76 crore in 2012-13
to 3,834.71 crore in 2013-14 before the acquisition and drastically increased to 10,319.53 crore in
2014-15 to 13,668.13 crore in 2015-16 after the acquisition.
9. Myntra’s Revenue and Pat (profit after tax) for last 5 years
Chart Title
500 433
400
300
212
200
100 67
9 18
0
-7 -15
-100 -51
-200 -135
-173
-300
2009-10 2010-11 2011-12 2012-13 2013-14
REVENUE PAT
In crore INR
Fig.3.9
Fig.3.9. shows the increasing loss of Myntra from 7 crore in 2009-10 to 15 crore in 2010-11 to 51
crore in 2011-12 to 135 crore in 2012-13 to 173 crore in 2013-14. Myntra was suffering huge losses
so the deal with Flipkart was a great decision.
4. CONCLUSIONS AND
RECOMMENDATIONS
4.1 CONCLUSION
Experts say that investors will have a tough time justifying deploying fresh capital into the other
players—besides Flipkart and Snapdeal—as the gap between the three leaders and the rest is
increasing tremendously. Backing these players will be very difficult going forward. Amazon may
look to grow here through acquisitions, a strategy it has implemented in its home market US. China
boasts of big e-commerce players like Alibaba and Tencent while the US is a two-way fight between
Amazon and eBay. Two other Bangalore based e-commerce companies Mu-Sigma and InMobi,
have been eyeing similar valuations as they explore fresh fund raising or listing plans in the near
future. These advancements in span of less than three months had proved that mergers and
acquisitions can be best tool for growth in this competitive and dynamic business environment. The
implementation of M&A needs to be done properly and in a well-planned manner, in order to attain
the aim. Hence, we can safely conclude that M&A had always been and will be the most commonly
used growth strategy in future too.
The Indian government has restricted foreign companies from selling their products in India through
the online medium. This regulation safeguards Indian companies against competition from global
leaders such as eBay and Amazon. Currently, 100 per cent FDI is allowed in business-to-business
(B2B) e-commerce in India, but when it comes to business-to-consumer (B2C), it is prohibited.
Besides, there is a mandatory 30 per cent local sourcing norm for foreign players. According to a
recent report by IAMAI-KPMG, Indian inventory-based e-commerce sector failed to grow as much
as international counterparts that have FDI support despite having one of the largest internet
populations. While B2C players have been in conversation with the government from the beginning
of 2013. However, new government might allow FDI in e-commerce. Government should provide
legal framework and guidelines in ecommerce to expand companies’ horizons, basic rights such as
intellectual property, prevention from fraud, consumer protection, confidentiality, and etc. through
which they can expand their businesses by lowering cost and can contribute maximum to the
progression of Indian economy.
M&A’s, if properly executed can create greater value. Based on thorough analysis and due diligence
company should proceed with the takeover. Finance, legal and HR departments collect data on
various measures which can help in monitoring and assessing the success of an M&A such as
increase or decrease in share price, revenue, operating profit, productivity levels, profitability, and
market share and so on. Following aspects should be always kept in mind while undergoing any
activity of M&A.
Identifying opportunities for providing competitive benchmarking measurements for fast
improvement in company.
Measuring market and technical trends to forecast future growth potential of company's
technology.
Personal ambition/motives of industry & financial reward which the firm will earn due to
M&A should be targeted.
Big takeover attract media and boosts up reputation but companies should link reward to
growth.
Peer Pressure and Pressure from advisers & media to do takeovers should be taken care of.
Concern that firm may be left behind or Over-confidence should be taken care of.
Always make use of surplus cash and high share price and Bargain hunting & asset stripping.
Motive should be to extend the business- locations, markets, and globalization.
Improving negotiation and price by knowing the company's exact market position.
Providing credibility and insurance to investors and bankers.
Measuring customer attitudes on company's products to indicate their image in market.
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