FlipKart's acquisition of Myntra is not about profitability: Bansals

Written by Sayan Chakraborty | Updated: May 23 2014, 17:24pm hrs
Sachin BansalWith Flipkart's acquisition of Myntra, FlipKart looking to conquer India's online fashion: Bansals
Looking to conquer India's online fashion space with Flipkart's acquisition of Myntra, Flipkart co-founders Sachin Bansal and Binny Bansal and Myntra CEO Mukesh Bansal tell FE's Sayan Chakraborty about future plans in the online apparel space and how they plan to make it the biggest contributor to Flipkart's revenues.

How long have you been working on this deal

Sachin Bansal: We have been talking to each other for a few months. We started with all kinds of options on the table regarding how we work with each other. We discussed whether itll be a partnership or investment. Then we started exploring the acquisition opportunity. As we talked more, we felt that's the right choice.

Binny Bansal: As we talked more, we realised the way Myntra is building the fashion business, it's going to be really successful.

So Flipkart pitched in the idea first

Sachin: Of course.

When will you be profitable as a group

Sachin: Profitability continues to be the second prio-rity as compared to growth.

Binny: The market is growing from $3 billion to $50 billion in 2020. This acquisition is not about profitability. It's about getting scale, increasing market share and becoming more dominant in the space.

Mukesh: Fashion gives a huge lever to drive profitability. Similarly, scale also drives profitability. The way we are looking at it, profitability is definitely an option, but today it makes more sense to invest deeply in technology and supply chain and build the brand. Profitability can be achieved by pulling the lever but we don't believe that's the right thing to do.

Is fashion going to be your biggest business

Sachin: Soon it will be the biggest segment. Our biggest vertical continues to be electronics for now. But fashion will grow faster.

Binny: In terms of transactions, in the long term, we see fashion being the bigg-est, but from a revenue point of view, itll be electronics.

Are any investors exiting Myntra

Mukesh: Investors are thrilled. A lot of them have been part of Myntra's journey for a long time. I am sure the outcome from a portfolio perspective will be appreciated. They also see value upside in future. But, we can't reveal more.

Have you been given any stake at Flipkart

Mukesh: Sure. Not only myself, the entire Myntra management team and employees will get that option in Flipkart with significant future upside. We are excited about working together.

Are you looking forward to further acquisitions

Sachin: We continue to evaluate acquisition opportunities in different verticals. We continue to evaluate all kinds of deals. The differentiating factor is teams have to be great and that filters out a lot of firms. But, the-res nothing big in pipeline.

How does it feel post the acquisition

Sachin: Mukesh continues to be a large stakeholder in Flipkart's growth. He will be part of Flipkart's overall strategy and fashion will be the largest contributor to Flipkart's future growth. We learn a lot from him.

Mukesh: I have known Sachin and Binny for a while. I think there is eno-ugh mutual respect and we learn a lot from each other.

Why did you choose to keep the companies as separate entities

Mukesh: Myntra is a household brand. A lot of investment has gone into building the traffic at Myntra website. Myntra's brand also stands for something unique and has a different space in consumers' mind. We want to leverage that. Similarly, on the Flipkart side, consumer base is different. By trying to combine both, we would have lost our value. We kept them separate because Flipkart's consumer base is different. On one hand is the largest selection, service and price and on the other hand, there is a different fashion shopping experience. We are greedy and want to have both pies.