ââMyntra Jabong India Pvt.â âLtd,â âthe business-to-business âââretail arm ofâ âFlipkartâ-âowned fashion eâ-âtailerâ âââMyntra,â âhas secured âa working capital credit âof Rs 50 crore ($7.7 million)â âfrom Kotak Mahindra Bank, a âperson familiar with the development âtold VCCircle.
Following the transaction, the lender will have exclusive charge of the companyâs raw material stocks, semi-finished and finished goods, consumable stores and receivablesâ, the person added.
âE-mail queries to Myntra seeking more informationâ âdid not âelicit a âresponse âimmediately.
Theâ âdevelopment comesâ âââless than two months after VCCircle reported that âââthe company had secured a similar facility âof Rs 199 crore ($31.1 millionâ thenâ) from Yes Bankâ.
âWhile taking loans is not unusual in the corporate space, the extent of a companyâs reliance on working capital credit is an indicator of its cash flow position and the businessâ recovery cycle.
Flipkartâs other group entities have also resorted to loans for meeting their operational needs.â âIn June last year, VCCircle had reported that Flipkart was in advanced talks to raise $300 million (Rs 2,000 crore then) in loans from Indian banks since the equity infusion it was seeking at a valuation of $15 billion looked like a long shot.
Last month, VCCircle reported that Flipkart India Pvt. Ltd, the wholesale cash-and-carry arm of Flipkart, secured a working capital credit of Rs 1,000 crore ($156.2 million) from Axis Bank,â besides an existing Rs 375 crore facility it already had with the bank.â
ââMyntra Jabong India, earlier known as Quickroutes Internet Pvt. Ltd, was âestablished in March 2017 as the B2B âretailerâ âto e-commerce marketplaces Myntra and Jabong, besidesâ âothers.â â
Though the move was seen as complementary to âthe company's private label âpush, âand âan effort âto take advantage of 100% foreign direct investment in B2B e-commerce,â âthe company is yet to reveal its strategy.â â
In âan earlier interaction,â âMyntra CFO âDipanjan Basuâ had said that the corporate restructuring was done âto âhave a dedicated focus on the âB2B side of things.â ââ
Industry expertsâ, however, feel the move is aimed at both leveragâing the liberal FDI investment normsâ âand complyâing with the regulatory normâ whereâin a single seller cannot account for more than 25% of the annual sales âof an e-commerce marketplace.â
âThis is most likely an exercise to create an independent seller entityâ that can store âMyntra's private labelsâ ââas well as other brandâs' merchandiseâ, âand supply them to its associated marketplace entities, something similar to a WS Retail (for Flipkart) and Cloudtail (for Amazon).
Also, it also makes the process of fundraising easier and regulatâion-âcomplianâtâ,â said Satish Meena, senior forecast analyst at Forrester.â
It could also be part of âFlipkart's longâ-termâ strategy to consolidate the number of sellersâ, as well as control margins, sales âand consumer experience, he added.â