Tuesday 3 May 2016

Jabong’s troubles continue, faces possible funding shut off

Jabong is trying to maintain balance in a rocky ship. The fashion retailer, which is a part of the Global Fashion Group (GFG), has seen rapid decline in its valuation over the past few months. Recently, GFG’s principal investors, Rocket Internet and AB Kinnevik put in $339 million to the group. However, along with getting more money, GFG’s value was brought down by a whopping 68%.
When Jabong debuted in the Indian fashion market, it was keeping pace with veterans like Myntra. However, today Myntra, Flipkart and Amazon have outpaced the company. Jabong’s senior management and all its founders walked out, leaving the company to hire a fresh set of management team, including a new CEO. Sanjeev Mohanty, former MD of Benetton India, took charge as CEO of Jabong in late 2015.

Seeking help all around

Jabong also sought the services of Avendus, a financial services firm to help improve its fortunes. However, nothing helped in the company’s attempts to find a suitable buyer. A source familiar with the developments at Jabong has revealed that GFG might simply give up on Jabong and not fund the fashion etailer any more.
Citing inability to meet targets, the person says on condition of anonymity,
“The company has failed to meet targets set by global investors and hence India is not on the priority list.”
However, Mohanty is trying to retain a cheerful and optimistic exterior. He plays down the severity of the situation with,
“The funding round by GFG demonstrates the belief of internal shareholders in the fashion e-commerce opportunity in all its six markets and to fully capitalise them. As per the quarterly rolling forecast, the funding (to Jabong) comes in on a monthly basis. We remain committed to expanding and improving, not exiting, our business.”
All this is certainly worrying, particularly in the backdrop of the worrying changes that the new FDI regulations have brought to online marketplaces.

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