BANSALSSACHIN AND BINNY AT FLIPKART AND ESPECIALLY

MUKESH AT MYNTRA

Rationale behind
This Merger seems to Merger
have strategic reasons for the business

combinations.

Positioning
Taking advantage of future opportunities that can be exploited
when the two companies are combined. For example, a
telecommunications company might improve its position for
the future if it were to own a broad band service company.
Gap Filling
One company may have a major weakness (such as poor
distribution)whereas the other company has some significant
strength. By combining the two companies, each company
fills-in strategic gaps that are essential for long-term survival.

Bargain Purchase
It may be cheaper to acquire another company then to invest
internally.
Diversification
It may be necessary to smooth-out earnings and achieve more
consistent long-term growth and profitability.
Short Term Growth
Management may be under pressure to turnaround sluggish
growth and profitability. Consequently, a merger and acquisition
is made to boost poor performance.

Indian E-Commerce
Market
The Indian e-commerce
market was worth 75,000 crore, in
2013 according to a joint report by KPMG and Internet and
Mobile association of India.

India has the potential to double its economic contribution

via Internet, from 1.6 percent GDP at present to 2.8 and 3.3
percent by 2015 [MCkensy2012].
Indian E-commerce is most likely to generate employment
for 1.45 million people in coming two years.

Rationale of
Wanted Apparel products Specialization , deeper understanding of
Fashion , aesthetic presentation and experience fashion products to
become the most popular category in near future.
For Flipkart, setting up ahuge fashion verticalmeans boosting
margins, because fashion has the highest margins - 35 to 40 per cent
- among all products sold online. Myntra has big plans with its private
brands like Anouk, Dressberry and Roadster, which promise margins
as high 60 per cent.
Flipkart will bring in its capabilities in customer service and
technology. Both companies will also net customers that have
shopped on both portals - about 80 per cent of the country's online
shoppers have shopped on either Myntra or Flipkart.

Rationale of
To have a stronger distribution network with present
ratio being at 70:250
To Foray into the mobile platform
To increase warehouse capacity by 4 times.

Reasons why Flipkart and Myntra merged

To combat the threat being posed by foreign online retail competitors like
Amazon and eBay and domestic rivals like Snapdeal and Jabong. This is
supported by government policy of allowing foreign investment in
ecommerce.

Myntras strength in high-margin fashion and lifestyle category also made

Flipkart make a merger offer to the former.

Flipkart and Myntra together generate more than 50 percent of the

online fashion sales and the companies aim to increase that number to
60-70 percent over time.

 Another common factor between them is surname of their owners.

While Sachin Bansal and Binny Bansal launched Bangalore-based
Flipkart in 2007 that has seen around Rs 6,100 crores in sales.
Bangalore-based Myntra Designs, founded by IITian Mukesh
Bansal has seen its profits range from 30 to 50 percent.
Both companies have common investors. US hedge fund Tiger
Global and venture capital firm Accel Partners hold significant
shares in both the companies. And both also pushed Flipkart and
Myntra to merge.
Tiger and Accel together own 53 percent shares, while IDG
Ventures and Kalaari have a combined stake of 28 percent in
Myntra. In Flipkart, the two common investors (Tiger & Accel)
together hold around 40 percent stake.

Synergy
value
Revenues: By combining
the two companies, they will realize

higher revenues then if the two companies operate separately.

Expenses: By combining the two companies, they will realize

lower expenses then if the two companies operate separately.

Cost of Capital: By combining the two companies, we will

experience a Lower overall cost of capital.

Indian E-retailing market

Size
: $9.7 Billion
CAGR
: 35%
Main Segments Contenders:
Segment size
1. B2B
mjunction; India mart
80%
2. B2C
20%
a. Travel IRCTC
71%
Airlines
Ibibo
Online shopping:
16%
i. Fashion Jabong ,FlipKart
30%
ii. Books FlipKart ,Snapdeal ,Amazon
15%
iii. Baby care
& Personal care FlipKart , Babyoye
10%
iv. Home dcor

Pepperfry

v. Electronics Flipkart,Snapdeal,Amazon

6%
34%

Revenues & losses 2013-14[Rs crores]

Revenue Loss
Flipkart 179 400
Amazon 168.9
321.3
Snapdeal
154.11 264.6
Future:
Intense competition
High cost due to poor infrastructure
Very low margin
Arenas : Large
Vehicle : Low cost

vs

Small

vs

Niche products

Consolidation: M&A
FlipKart gets dominant position in Fashion segment