Strug­gling to Find a Buyer, Jabong Slashes Price Tag

Por­tal finds no tak­ers even at $100 mil­lion — 1/10th the price it was seek­ing in 2014

The Economic Times - - Front Page -

Mad­hav Chan­chani, Biswarup Gooptu & Sa­gar Malviya

Ben­galuru | New Delhi | Mum­bai: On­line fash­ion por­tal Jabong, which has been on the block for over a year, is strug­gling to find a buyer de­spite its in­vestors drop­ping the ask­ing price dras­ti­cally, ac­cord­ing to three peo­ple aware of the de­vel­op­ments.

The Rocket In­ter­net-backed firm, which has posted a drop in sales and cut losses in 2015, has found no tak­ers for even an es­ti­mated price of $100 mil­lion, said a source, a far cry from the price of around $1bil­lion that it sought dur­ing talks with Ama­zon In­dia in 2014 that failed to re­sult in a deal. While Jabong was founded un­der the ban­ner of the Ger­man In­ter­net in­cu­ba­tor in 2012, the cur­rent push for a sale is be­ing driven by Swedish in­vestor Kin­nevik, which owns a big stake in Jabong’s par­ent com­pany Global Fash­ion Group, the sources told ET.

“They (Rocket In­ter­net and Kin­nevik) just want to park the com­pany some­where, find a home for it,” said one per­son di­rectly briefed on the mat­ter. “But there are no buy­ers yet.” Ear­lier this month, Rocket In­ter­net sold an­other of its In­dia port­fo­lio com­pa­nies — fur­ni­ture por­tal Fabfur­nish — to Kishore Biyani’s Fu­ture Re­tail, sig­nalling its in­tent to exit In­dia. Biyani snapped up Fabfur­nish for around .₹ 11crore, ac­cord­ing to sources and com­pany fil­ings re­viewed by ET.

Jabong, too, has held talks with Biyani’s Fu­ture Re­tail, which made a pre­lim­i­nary of­fer for the com­pany, said a per­son aware of the talks. But un­like Fabfur­nish, Jabong has been able to hire top-level man­agers — for­mer Benet­ton In­dia man­ag­ing di­rec­tor San­jeev Mohanty came on board in Novem­ber 2015 as chief ex­ec­u­tive of­fi­cer and for­mer eBay ex­ec­u­tive Mu­ra­likr­ish­nan B joined as chief op­er­at­ing of­fi­cer in Fe­bru­ary. This could make it a rel­a­tively more at­trac­tive as­set for over­seas play­ers look­ing to en­ter In­dia, said ex­perts track­ing the process, es­pe­cially af- ter the govern­ment al­lowed 100% for­eign di­rect in­vest­ment in on­line mar­ket­places. A Rocket In­ter­net spokesper­son de­clined to com­ment. Mohanty said he would not like to com­ment on what he termed as “mar­ket ru­mours”. There were no replies to email queries sent to Fu­ture Re­tail and Kin­nevik.


Peo­ple aware of the de­vel­op­ments within Jabong, which com­petes against Flip­kart’s unit Myn­tra, said the prob­lem that in­vestors look­ing to sell the com­pany face is not just about price, it is also about tim­ing. “It’s a ques­tion of math as well as chem­istry,” said one of the sources.

In 2015, Jabong — which has cut back on consumer dis­counts just as peers in the in­dus­try have done — posted a 7% fall in rev­enue at .₹ 869.1crore but trimmed losses to .₹ 46.7 crore from .₹ 159.5 crore af­ter a clam­p­down on dis­counts. Sources said the is­sue with Jabong is that it has not been able to main­tain growth with­out dis­counts. Gross mer­chan­dise value (GMV), or the to­tal worth of goods sold, for the last quar­ter of 2015 fell by 19%. GMV for the year grew by just 13.8% in 2015 to Rs 1,502 crore com­pared with a 158% growth in 2014. With a pre-tax loss of .₹ 426 crore, the com­pany spent about 49 paise to get one ru­pee of sales com­pared with a 56-paise loss for ev­ery ru­pee earned in 2014.

“In­creased fo­cus on gross profit mar­gin, unit eco­nom­ics and over­all prof­itabil­ity re­sulted in net rev­enue and GMV de­cline in Q4,” the com­pany said in an in­vestor pre­sen­ta­tion on Thurs­day.


Mohanty said in re­sponse to ET’s ques­tions on fi­nan­cial per­for­mance that Jabong is “bring­ing in a very fru­gal cul­ture and op­er­at­ing like how a good re­tail off­line busi­ness should op­er­ate”.

Peo­ple track­ing its at­tempts to find a buyer ar­gue that Jabong may have to bring down its val­u­a­tion ex­pec­ta­tion, de­pend­ing on how much cash it still has in the bank. Since Au­gust last year, its Ger­man par­ent Jabong GmBH has in­vested over .₹ 200 crore in Jade eS­er­vices, which owns and op­er­ates Jabong in In­dia, in six tranches, ac­cord­ing to reg­u­la­tory fil­ings re­viewed by ET.

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