When Myntra Met Jabong

The marriage seems to be doing fine, but why was JABONG sold in the first place? The answer is in the opaque laws regarding foreign direct investment in e-retail.

- Debabrata Das

When a company that’s been bought out by another goes on to acquire a company that’s on the verge of being bought by another company ... things are going to get more than a little confusing. To those who have not been following the dizzying activities in Planet E-Commerce, Flipkart bought Myntra in 2014, and Myntra bought Jabong in July 2016. Oh, the buzz around that time was that Snapdeal, the other e-retail biggie, was on the verge of buying Jabong, when Myntra snatched it away.

Now, much of the drama surrounding the buy has been covered in dreary detail. Did Myntra pay too much for Jabong? Did Snapdeal actually have the wherewithal to buy another company? What was Flipkart’s big game? And so on. Here’s the thing. Myntra spent $70 million (then Rs 449 crore) to buy a company that reported revenue of Rs 902 crore in 2015-16 and net loss of Rs 362 crore. The same year, Myntra reported consolidated revenue of Rs 1,031.8 crore and loss of Rs 823 crore.

Why did investors Rocket and Kinnevik sell a company that seemed to be leaking less than peers in the industry? The popular narrative revolves around corporate governance violations at Jabong and the controversial sale of GoJavas, the logistics arm of Jabong, to Snapdeal in 2015. (Snapdeal has since sold its stake in GoJavas to an entity named Pigeon Express and filed a complaint with the Economic Offences Wing against former senior executives of QuickDel Logistics, the company operating GoJavas. That’s a story for another day.)