GFG in talks with Paytm to sell off Jabong

After reporting heavy losses in the first quarter of this fiscal, online fashion company Jabong owned by the Global Fashion Group (GFG), is said to be negotiating with payment services provider Paytm to sell the loss-making fashion retailer. If the deal gets through, it would be the second largest acquisition after Flipkart acquired Myntra in May 2014.

Sources claim AB Kinnevik, the largest shareholder of GFG, is leading talks, while scouting for a suitable company to acquire Jabong. Kinnevik is also negotiating terms on behalf of Rocket Internet, which holds over 21 percent stake of GFG. Kinnevik owns more than 25 percent stake of GFG. With struggle to become profitable and remain ahead in the competition gains momentum, leaders of India’s ecommerce – Flipkart, Snapdeal and Amazon are looking at acquiring viable businesses. Experts point out that going ahead, consolidation will be the key to success among online players.

Recent reports suggested that the company was looking to hire a new chief executive officer (CEO) as co-founders Praveen Sinha and Arun Chandra Mohan have resigned from the company. In another development, Jabong under pressure to perform is said to have also shut its design office based in London that designed its western private label. Jabong has emerged to be the worst performer among Rocket Internet-backed firms.

Jabong’s first quarter operating margins dwindled compared with the same quarter of 2014. In September 2014, Rocket Internet merged Jabong with four other online fashion retailers in Latin America, Russia, Middle East, Southeast Asia and Australia to create Global Fashion Group (GFG). GFG houses the German e-commerce company’s fashion businesses from emerging countries, including India’s fashion website Jabong, Latin America’s Dafiti, Russia’s Lamoda, Namshi of the Middle East and Zalora of South-East Asia and Australia.