Rocket Internet-promoted online fashion store Jabong — which is in talks with e-commerce giant Amazon for a possible acquisition — has trebled its revenues to Rs 324.6 crore for the first six months ended June 30 against the corresponding period last year, according to Swedish investment firm Kinnevik, an investor in Jabong. Operating losses however mounted to Rs 163.4 crore during the period from Rs 133.3 crore in 2013, the latest figures have revealed.
According to sources close to Jabong, the e-tailer, which has raised $180-190 million from German incubator Rocket Internet, Kinnevik and UK’s development financial institution CDC, is being valued at $600-700 million.
Between January and June this year, the e-tailer’s gross merchandise value ballooned to Rs 509.4 crore from Rs 172.6 crore from the corresponding period last year and so did the number of orders serviced. While Jabong shipped 1.18 million orders in H1 2013, the number swelled to 3.20 million this year. Jabong also sits pretty on cash reserves of Rs 702.8 crore as on June 30, 2014, said figures published by Kinnevik.
Jabong has also opened new offices in the UK and Spain, primarily focused on the design of its private labels. The company plans to launch two to three private labels by January next year. Cross-country rival Myntra also has an office in London to drive partnerships with brands in the UK and Europe.
“Right now, it’s nothing concrete (acquisition). It is not at an advanced stage yet,” said one of the persons aware of the development. The deal, however, may run into regulatory hurdles as Jabong cannot raise foreign capital since it holds inventory. “Jabong also has a dual structure to comply with FDI norms. Amazon has to become comfortable with it.”
Amazon, which is facing stiff competition from homegrown e-tailer Flipkart, is looking to ramp up its fashion play, traditionally a high margin business. According to a report by Accel Partners, one of the investors in Flipkart, the online fashion, footwear and accessories market in India was valued at $559 million in 2013 and is projected to reach $2.8 billion by 2016, growing at a CAGR of 71%.
While Flipkart has an edge over Amazon in the fashion space following its acquisition of Myntra at a valuation of about $350 million, Amazon is likely to spend almost double the amount to acquire Jabong. According to industry observes who didn’t want to be named, Jabong may bargain for a higher valuation based on its growth rate. While GMV increased 195.1% in the first six months ended June 30, 2014 as against H1 2013, the number of orders serviced grew 170.7%.
In September, Jabong was merged with Dafiti of Latin America, Lamoda of Russia, Namshi of West Asia and Zalora of Southeast Asia and Australia to create a $2.7-billion Global Fashion Group, where Kinnevik, Rocket Internet and Access Industries will be the largest shareholders with 25.1%, 23.5% and 7.4% stakes, respectively.