Stock Market

Has Jabong become a fashion faux pas?

Deepak Kumar

By late 2015, Amazon had been in talks to buy Jabong for over a year. The American e-commerce giant, which had entered India only two years before, was keen on taking the fight to Indian e-tail poster boys Flipkart and Snapdeal.

The e-commerce industry was on a roll back then. Home-grown Flipkart had recently bought Myntra for USD 300 million (Rs 2200 crore) in May of 2014. The outlook as a whole was rosy for e-tailers. As per consultancy firm PwC, domestic e-commerce companies had grown 34 percent annually since 2009 to reach USD 16.4 billion in 2014. It was further expected to touch USD 22 billion in 2015.

But Amazon and Jabong’s owner Global Fashion Group (GFG) couldn’t agree on a price. Amazon valued the Indian fashion e-tailer at around USD 250-USD 300 million. But GFG’s asking price was nearly double Amazon’s quote. Following this mismatch, the deal fell through in October 2015.

In hindsight, one wonders, had GFG agreed to Amazon’s price tag, would Jabong be in the deep waters it is in now?

Jabong’s net revenue growth has been slowing, too. From a high of 136 percent increase seen in 2014, it dropped to 7.1 percent in FY15, according to Jabong backer Rocket Internet’s annual report.

Last year, the fashion e-tailer’s co-founders left. Ever since pressure has mounted on GFG to find a buyer.

According to a Mint report, GFG has been in talks with Paytm and Aditya Birla group to sell Jabong.

GFG’s investors Rocket Internet and Investment AB Kinnevik which had founded it in 2011 have so far kept the show on the road.

Recently, they agreed to pump in a total 300 million euros into GFG—a move which many see as throwing good money after bad.

The deal valued GFG at 1 billion euros – a one-third drop in valuation in less than a year.

And the question is how long can Jabong survive? It is anybody’s guess.