Rocket Internet pumps capital into GFG, but devalues Jabong
Online fashion etailerJabonghas reason to smile.Investors Rocket Internet and AB Kinnevik have given a $ 339 millionto its investee Global Fashion Group (GFG), of which Jabong is a part. However, the latest developments put GFG’s valuation at $1.13 billion, a devaluation of nearly 68% in a year’s time.
Romain Voog, CEO of GFG said,
“The financing will provide GFG with the necessary capital to continue to execute its strategy of building out its leading position in the online fashion sector in emerging markets.”
Oliver Samwer,CEO of Rocket Internet, said,
“As part of the transaction, Rocket Internet has agreed to underwrite up to €100 million of the Financing. Rocket Internet expects to invest up to €85 million including the conversion of an existing investment at the terms of the Financing.”
Jabong and its tough days
Jabong has always been sort of an unloved child. The companyjoined the GFGin April 2015. Shortly after (October 2015),GFG was in talks with Snapdealto sell off the company. Then came the news that the company had had a good run in January 2016, and was hoping tobreak even soon. However, the company was still seeking out buyers. Kishore Biyani’sFuture Group bought FabFurnishfrom Rocket Internet, but declined to buy sister concern Jabong. The company laterbrought down its asking price, but still no one expressed interest in buying it.
Experts also feel that investors will begin to keep a close watch on companies’ key metrics.Says Ashvin Vellody, partner in ecommerce and start-ups at KPMG,
“At this stage, the stakeholder expectation for companies that have been around for a few years is to show strong operational discipline and a clear path to profitability.”
Jabong is not the only one to face devaluation. In the past,Morgan Stanley devalued Flipkart,Snapdeal’s investors pulled out, and companies have been unable to reach their targeted GMVs. Ecommerce is in a tough spot, but it might well be the pains associated with growth. Economic theory states that a plateau has to be crossed before the peak.