Jabong's Parent Global Fashion Group Raises $339 Mn, Valuation Down By 68%

Rocket Internet’s Global Fashion Group (GFG) has raised $339 Mn (Euro 300 Mn) at a valuation of $1.1 Bn (Euro 1Bn), a 68% less than previous $3.5 Bn (Euro 3.1 Bn) in July last year. The investment came from its primary backers, Germany’s Rocket Internet SE and Swedish investment firm Kinnevik.

Kinnevik will invest up to €200 Mn while Rocket Internet will underwrite the remaining. The exact allocations of funds are yet to announce. However, as per media reports, Luxembourg-based venture with Kinnevik, will get up to EUR 100 Mn.

Global Fashion Group consists of six ecommerce companies viz. Jabong (India), Dafiti (Latin America), Lamoda (Russia and CIS), Namshi (Middle East), The Iconic (Australia), and Zalora in South-East Asia.

Although, the round will act as a fresh breather for almost all GFG companies, it would act as a life saver for Gurgaon-based online fashion etailer Jabong.

Here is a brief snapshot of Jabong’s current position:

With its launch in 2012, in last four years, the company has eaten up most of the cash in discounts, marketing and inventory to scale up.
Its five founders have either left or were replaced in a management churn last year.
Its gross merchandise value (GMV) dropped by one-fifth to INR 377.3 Cr. in October-December 2015.
Company Valuation and Flow Of Funds: To date a total of $240.7 Mn has been infused into the company. A few disclosed fundings are shown below:

$100 Mn in February 2014 → after merger with GFG → $35 Mn In April 2015 → $20 Mn in March 2016
It was valued at €388 Mn at the end of year 2013. The valuation grows to $1.2 Bn while Amazon shown interest in buying the venture in November 2014. Since then, it has dropped to $100 Mn, failing to result in a deal.

Rumours says that Rocket Internet has been in talks with top ecommerce companies including Amazon, Paytm and Snapdeal to sell Jabong operating unit, Xerion Retail, as its net loss widened to INR 43.6 crore from INR 16.6 crore a year earlier. A year ago, it had sales of INR 527 crore with a net loss of INR 16.6 crore.

Despite of large sale volumes, the portal is not being able to generate profits owing to increasing net losses. However, the major concern here is not losses but the fast depletion of cash resource. Wherein, the major competitors like Flipkart and Snapdeal are pouring in billions from overseas investors, Jabong has just handful of millions to survive.

The latest investment from GFG could be a turn back for the startup into the group of leading ecommerce retailers. Ecommerce market is currently growing at an expected valuation to reach $119 Bn by 2020. The consumer has become informed and more stable with online payments. This is an era where no more discounts are required to attract consumer to the online portal. Thus, a good marketing strategy and product portfolio could change the game for Jabong with a lightning streak.

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