Global Fashion Group (GFG), parent company of fashion portal Jabong, has secured a funding of 300 million euros from German startup investor Rocket Internet and other existing investors, but has seen its valuation drop to one-thirds at one billion euros in less than a year.
In the current round of funding, Rocket Internet will underwrite around 100 million euros (about Rs 762.7 crore) of the financing. It will invest around 85 million euros, including the conversion of an existing investment at the terms of the financing.
“GFG has secured a successful funding round of at least 300 million euros, which has been underwritten by Rocket Internet and other existing shareholders,” Rocket Internet said in a statement. Besides, Sweden’s Kinnevik has committed to invest up to 200 million euros in the company.
The transaction values GFG at one billion euros.
Last July, the German firm had said GFG had a valuation of 3.1 billion euros post its participation in a 150 million euros internal financing round.
Lack of profits has raised concerns over valuations of startups globally, leading to many of these businesses facing difficulty in raising fresh funds.
In the recent past, mutual fund T Rowe Price cut back its valuations in many of its tech startup investments, including India’s Flipkart. Morgan Stanley, too, made a similar move earlier this year.
“Pre-funding has been provided by way of a 50 million euros shareholder loan during the first quarter. The balance is expected to be invested during the second quarter subject to other shareholders’ participation and approval,” Kinnevik said.
The financing will provide GFG with the necessary capital to continue to build on its leading position in online fashion sector in emerging markets, GFG Chief Executive Officer Romain Voog said.
Meanwhile in a separate statement, Rocket Internet said its Supervisory Board has decided to propose former Deutsche Bank CFO Stefan Krause and Orange CEO Delegate Pierre Louette to be elected as new Supervisory Board members.
They will succeed Lorenzo Grabau and Erik Mitteregger to increase the number of Supervisory Board members independent of Rocket Internet shareholders.
Rocket did not give reasons for the departures.
During the first quarter of 2016, GFG reduced its loss from operations meaningfully compared to the year-ago period, resulting in an improvement of the adjusted EBITDA margin by over 10 percentage points.
“This is in line with GFG’s plan to deliver an accelerated path to profitability across its regional businesses while continuing to capture the significant market opportunity available,” Voog said.
Founded in 2014, GFG combines six regional brands — Dafiti in Latin America, Lamoda in Russia and CIS, Namshi in the Middle East, The Iconic in Australia, Jabong in India and Zalora in South-East Asia. “We continue to be very excited about the prospects of GFG, which has successfully built out leading market positions in key emerging markets. We are looking forward to continuing to work with the GFG team as well as Kinnevik and the other GFG shareholders to support GFG,” Rocket Internet CEO Oliver Samwer said.
The German tech startup investor also has investment in Food Panda in India.
Jabong MD and CEO Sanjeev Mohanty said the funding will help the firm enhance business operations.
“We have had success over the past few months, with Jabong recently recording its best month in terms of revenue… GFG sees good progress with Jabong in India and this trust will help us strengthen our operations in the country,” he added.
Jabong narrowed down its gross loss to Rs 46.7 crore for 2015 on the back of lower level of discounts from Rs 159.5 crore in 2014.
In India, fashion is one of the largest and fiercely contested categories in e-commerce space.
Launched in 2011, Jabong offers more than four lakh products. It was merged with GFG in 2014.