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Flipkart’s Myntra acquisition talks stalled for now and here’s why

Discussions between Flipkart and Myntra for a merger seems to have stalled according to one of the biggest investors in both companies, reports The Wall Street Journal.

Subrata Mitra, a partner at Accel Partners which owns stakes in both Myntra and Flipkart told the publication that it is not sure if the deal is going through. Accel Partners and its investment partner, hedge fund Tiger Global Management, own a combined stake of 40% in both companies.

The merger is being held back over the status of Myntra following the acquisition.

Myntra Chief Executive Mukesh Bansal wants the company to stay independent after the acquisition, but everyone else wants the companies to pool in resources to put up a fight against Amazon. Apart from independence of Myntra, Bansal is also expecting an infusion of $150 million into Myntra so that it can expand operations and meet its growth plans.

Myntra had raised $50 million in February during its latest round of fundraising, but the process took six months, indicating that the company may not get the required funds easily in the future.

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Why is this deal important: This deal is also important for common investors who would rather the companies fight a joint battle against Amazon India and eBay-backed Snapdeal. Acquisition of Myntra will help Flipkart gain an upper-hand in the fashion and accessory space, which is one of the fastest growing verticals as of now. It is also important from logistics standpoint as the fashion retailer had launched same day delivery a while back in select cities. Flipkart too launched a similar service earlier this week. Amazon meanwhile has been letting people pick up their orders from kirana stores on a trial basis.

Till now Flipkart has raised a total $541 million from five rounds, which includes a reported $150 million funding in August 2012, $20 million in June 2011, $10 million in June 2010 and $1 million in 2009. Flipkart India Pvt. Ltd had reported a loss of Rs 281.7 crore in the year ended March 2013, up from Rs 109.9 crore loss it reported in the previous year. This, despite a five fold increase in revenue to more than Rs 1,180 crore from Rs 204.8 crore it reported in the previous year.

We have mailed Flipkart for clarification on the issue and will update the post once we hear back from them.

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