Rocket Internet’s Jabong to sell for peanuts, or maybe that’s the new normal

Screengrab of Jabong’s website.

Rocket Internet owned Jabong, an online clothes seller in India, is up for sale, and might go for as little as US$50 million, the Mint newspaper reported.

Rocket has been trying to exit its portfolio in India for months now. Companies like Jabong and Foodpanda in its once-celebrated portfolio have lost out to rivals due to various reasons. Jabong got edged out by rival Myntra and others like Amazon and Flipkart investing in the fashion category, and has been trying to look for buyers for months.

See: Is Rocket Internet’s Jabong running out of funds?

Jabong is now in discussions with Alibaba, Snapdeal, and Flipkart among others for a buyout, people aware of the matter told newspapers.

Multiple industry sources had earlier told Tech in Asia that Jabong was in talks with Amazon for a sale last year, but its demand of a US$1 billion valuation made Jeff Bezos’ ecommerce giant balk.

Leading the current deal talks is AB Kinnevik, which is also an investor in Jabong, sources told Mint. Kinnevik is looking for a valuation of US$100-150 million for Jabong in cash and stock, but there is a chance the deal might actually close at a much lower valuation of US$50-75 million, the sources told the paper.

The Economic Times said Jabong was asking for US$250 to US$300 million, but added that the actual sale is likely to be for lower than that. Tech in Asia did not independently verify the claims.

Jabong said “the news of a buyout are market rumours and would like to refrain from commenting on it.”

Even though the mid-point estimate of US$150 million may not be a bad deal for a company with Jabong’s financials, it is still a world removed from the lofty valuations the company was seeking even a year back.

For the three months ending December 31, Jabong posted a loss of about US$297,000. While that was an improvement over the loss of US$6.9 million in the fourth quarter of 2014, there were signs that the company was running out of cash.

Jabong’s sale then determines two things: firstly, despite the promise of the billion people in India, there isn’t space for me-too players in the industry. As ecommerce matures in India, it is likely going to be a battle of the deep pockets and long term players, while smaller firms either get swallowed or shut shop.

And secondly, the days of demanding crazy valuations, solely based on the promise of what could be, is over for sure. That is the new normal in the once candy flossed world of tech startups in India.

See: Zomato’s losses show profit’s still just a word for startups, meaning zilch