Rocket did not disclose how much of this €300 million it would invest in Jabong. A few months ago, investors had marked down the valuation of internet major Flipkart.
“First Flipkart and now Jabong. This shows a correction as the market was over-valued. On the positive side, investors are still willing to put in money, which reflects the sector-specific fundamentals,” says a former chief executive officer (CEO) with an online fashion portal, who has closely tracked Rocket.
Rocket recently sold its online furniture business in India to Kishore Biyani’s Future Group; there have been unconfirmed reports that it wants to sell Jabong and Foodpanda. In the recent past, Jabong made two top hires: former Benetton India managing director Sanjeev Mohanty joined as chief executive officer in November 2015 while former eBay executive Muralikrishnan B joined as chief operating officer in February.
In 2014, Rocket created GFG by bringing in six online fashion businesses in emerging markets under one umbrella: Dafiti in Latin America, Lamoda in Russia and CIS, Namshi in West Asia, The Iconic in Australia, Jabong in India, and Zalora in southeast Asia.
As part of the transaction, Rocket Internet has agreed to underwrite up to €100 million of the financing, the German internet firm said in a statement. It expects to invest up to €85 million including the conversion of an existing investment at the terms of the financing.
Oliver Samwer, CEO of Rocket Internet, said: “We continue to be very excited about the prospects of GFG, which has successfully built out leading market positions in key emerging markets. We are looking forward to continuing to work with the GFG team as well as Kinnevik and the other GFG shareholders to support GFG.”
Romain Voog, CEO of GFG, said: “We very much appreciate the continued support of our key existing investors in GFG. 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.”
“During the first quarter 2016 we have made significant progress on our path to profitability, reducing the loss from operations meaningfully in comparison to the first quarter 2015 resulting in an improvement of the adjusted Ebitda (earnings before interest, taxes, depreciation and amortisation) margin by over 10 percentage points year-on-year. This is in line with GFG’s plan to deliver an accelerated path to profitability across its regional businesses while continuing to capture the significant market opportunity available,” Voog added.