MYNTRA DESIGNS PVT LTD

Company Report: India-ecommerce-Unlisted

30 SEP 2014

www.indiabusinessreports.com

COMPANY BACKGROUND

Beginning
Myntra Designs Pvt Ltd (Myntra) claims to be Indias
largest fashion e-tailer. The company was founded in
2007 by IITians Mukesh Bansal, Ashutosh Lawania and
Vineet Saxena with a focus on personalization of gift
items. By 2010, Myntra shifted its focus to the online
retailing of branded apparel.
Since inception, the company appears to have raised
7-8 rounds of funding aggregating around Rs 6.9b (Rs
689 crore) from reputed investors like Accel Partners,
Tiger Global, IDG Ventures, NEA Indo-US Venture
Capital and Premji Invest. It was acquired by online
hypermarket Flipkart in May14 for a valuation of Rs
20.1b.

Promoters
Flipkart was promoted by 3 people: Mukesh Bansal,
Vineet Saxena and Ashotosh Lawania in Feb07. These
were the founder directors as well. The latter two quit
the board on Oct08. However, Ashutosh Lawania
continued to the included in the term founders in
subsequent legal documents.
Currently, Mukesh Bansal is the main promoter of the
company. The shareholding patter as on Sep13 was as
follows (with an issued equity capital of 5.1m shares of
Rs 1 each) :

As on Sep13
Directors
53%
Venture
Cap
6%
Foreign
Companie
s
34%
Bodies
Corp
7%
Shareholding Pattern
Board of Directors
Name Designation
Mukesh Bansal Director
Vani Kola Director
Subrata Mitra Director
Lee Jared Fixel Director
Ankit Nagori Director



Address

AKR Tech Park, 3rd Floor, 7th Mile
Krishna Reddy Industrial Area
Hosur Road, Bangalore - 560068

Financial Summary

Year ending June 30
FY11 FY12 FY13
Net Sales (Rs mn) 181.1 671.6 2124.9
EBITDA (Rs mn) -141.9 -493.1 -1308.0
EBITDA Margin (%) -78.3 -73.4 -61.6
PAT (Rs mn) -151.7 -512.6 -1347.6
Net worth (Rs mn) 841.8 1783.6 3856.8
Debt (Rs mn) 38.4 5.0 109.2

Sales Growth (%) 92.9 270.8 216.4
PAT Growth (%) 106.4 238.0 162.9
ROE (%) -28.4 -39.1 -47.8
ROCE (%) -33.7 -45.6 -56.6
D/E (x) 0.0 0.0 0.0






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30 Sep14
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From FY13 Annual Report

However, the above was not indicative of the true
equity holding, given that PE investors held 28.2m
preference shares.
In other words, if the PE shares were converted to
common shares, promoter holding would reduce from
53% as shown the previous pie chart, to 8.16%.



BUSINESS HIGHLIGHTS

Fashion Retailer: Myntra initially was into
personalised gift items. It mainly operated on the B2B
(business to business) model during its initial years.
Between 2007 and 2010, the online portal allowed
customers to personalize 15 products such as t-shirts,
mugs, mouse pads, calendars, watches, teddy bears,
pendants, wine glasses and jigsaw puzzles. Customers
could order for these online and these would be home
delivered in 3 days time
Within the initial 3 years, Myntra became Indias
largest personalization platform with more than 50%
of the market share. It also offered the personalization
of jerseys of various cricket and football teams
including the Indian cricket team, the IPL teams and
the Premier League football teams.
In 2010, it expanded its catalogue to include fashion
and lifestyle products. Myntra tied up with various
popular brands to retail a wide range of latest
merchandise from these brands.
Myntra offered products from 350 Indian and
International brands by 2011. Brands like Nike, Puma,
Converse, Adidas, Decathlon, Reebok, Lee Cooper,
Numero Uno, Sketchers, Crocs, Fila, Lotto, ID, Catwalk,
Carlton London and Red Tape found the perfect online
retail platform. Myntra also had casual wear for men
and women from brands like Jealous 21, Forever New,
Classic Polo, Inkfruit, Lee, Nike, Inc., Probase, Puma,
Adidas, Reebok, Ed Hardy, Decathlon, Lotto, Mr. Men,
Tantra and Guerilla. The website saw the launch of
Fastrack watches and of Being Human, the brand
The company now offers over 500 leading Indian and
international brands.
Marketplace: Myntra has about 100 sellers on board
and plans an aggressive increase to to 1,000 by FY15
end.
Logistics: Myntra delivers most orders within 7 days
from the order date. The orders are dispatched
through our own courier service - Myntra.com
Logistics, or through other courier partners such as
Blue Dart, Quantium, etc.
For all the subsequent purchases of Rs. 999 or more,
Myntra delivers the order at the customers home free
of cost. A shipping charge of Rs. 99 is applicable to all
orders under Rs. 999.
People: According to media reports, Myntra employs
around 1500 people currently.



FINANCIAL HIGHLIGHTS

The one positive thing Myntra has done is to grow
topline robustly. It appears growth has picked up
recently. In FY12 and FY13, revenues grew more than
3x the previous year. In FY14, according to media
reports, the company has reported revenue of Rs 800
crore, which is 3.8x FY13 revenue. This is astounding,
to say the least.
However, the flipside is the profitability performance.
That is, in one word, horrible. Check the chart below.
Earnings before depreciation and tax, in other words,
cash profit, were -60% of sales in FY13, fully five years
after starting operations.



This raises the question is this a real business?
The other thing Myntra was very smart at, was raising
funding (next section)


-110.7%
-72.0%
-78.3%
-73.4%
-60.7%
FY09 FY10 FY11 FY12 FY13
EBDT (or Cash Profit) margin
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30 Sep14
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FUNDING AND FUTURE PLANS

Myntra is now owned by Flipkart, but while it was
around, it did very well in terms of raising funding, and
at increasing better valuations.
In its 7 years of existence, Myntra raised funding
atleast once in each year.

When Amount
(Rs m)
Price (Rs) Investors
FY08 7.5 78.95 Erasmic, Sasha
Mirchandani
FY09 173.5 45.5 IDG, NEA
FY10 45.5 36.8 Tiger Global
FY11 617.4 78.2 Tiger Global
FY12 921.3 164.6 IDG, Accel, Tiger
FY13 1350.5 218.1 IDG, Tiger, Accel
FY13 722.7 302.5 Exclusively.in Inc
FY14 3055.2 261.2 PIOF, Tiger, IDG, Accel
FY15 2102.1 400.0 Flipkart

In round in FY12 was raised in was raised in Aug11. It
appears the company was struggling for funds by end
of FY12, since it seems to have taken a Rs 15 crore
loan from SVB India Finance, a subsidiary of US-based
Silicon Valley Bank. In return, SVB got right to
subscribe to preference shares. It does not seem to
subscribed to those rights, unless it did just before the
Flipkart transaction.
The total funding raised till FY14 was around Rs 6.9b
(Rs 689 crore). With the additional Rs 2.1b put in by
Flipkart, the funding goes upto Rs 9b (Rs 900 crore).
There seem to be instances were a dilution has
occurred at a price less than the previous round. That
should ideally lead to triggering of price protection
clause.



Merger with Flipkart: It is not clear if Flipkart paid
cash for existing shares, or the shares will be swapped,
and Myntra ultimately merged with Flipkart.
It appears the company may have been facing
difficulties in fund raising by FY14. The last round
appears to have been at a lower price, though it was a
good size. This round was raised in Feb14. With the
increasing aggression by global e-commm player
Amazon, it seems both Flipkart and Myntra felt it was
better to join hands. Common investors like Accel and
Tiger would certainly have helped in this.
Within 4 months of this round, the company
announced acquisition by Flipkart, which put in fresh
capital of Rs 2.10b.
If we value existing equity at Rs 400, then Myntras
valuation does come to Rs 20b, as reported by the
management
As per our estimates, the progression of valuations is
as follows:


*this assumes that one preference converts into one equity share
without adjustment of premium
The last column represents Flipkart deal, where the
company valuation touched Rs 20b.
Since Myntra is making huge losses, Price/Sales metric
could be the one used for making these deals. Flipkart
seems to have invested at 2.5x FY14 (trailing) sales.
That is astronomical to say the least. Typical sales
multiple of 2-3x or more are seen in sectors like FMCG
and pharma, where there is considerable entry barrier
brand value / intellectual property etc. Profit
making retailers typically quote at less than 1x sales.





-
2
4
6
8
10
12
-
5,000
10,000
15,000
20,000
25,000
FY09 FY10 FY11 FY12 FY13 FY13 FY14 FY15
Myntra Valuation Progression*
Valuation (Rs M), LHS
P/S, RHS
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30 Sep14
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Growth Plans: Post deal with Flipkart, the following
targets are getting reported in the media:

Rs 20b revenue by FY15
Myntra claims to have 30 per cent share of
online fashion market and along with its new
parent Flipkart, its share in the segment is 50
per cent. It plans to raise market share to 65-
70% in 2 years (presumably FY17)
It has launched private label brands
It is planning a fashion incubator, and fashion
weeks

India-Ecommerce-Unlisted Myntra Design
30 Sep14
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FINANCIAL DETAILS

P&L
(Rs mn) FY09 FY10 FY11 FY12 FY13
Net Sales
37.7 93.9 181.1 671.6 2124.9
EBITDA
-41.7 -67.6 -141.9 -493.1 -1308.0
Margin (%)
-110.7 -72.0 -78.3 -73.4 -61.6
Interest
0.0 0.0 0.0 0.0 21.3
Other Income
0.0 0.0 0.0 0.0 39.4
PBDT
-41.7 -67.6 -141.9 -493.1 -1290.0
Depreciation
2.6 5.9 9.8 19.6 57.6
Extraordinary Item

0.0 0.0
PBT
-44.3 -73.5 -151.7 -512.6 -1347.6
PAT
-44.3 -73.5 -151.7 -512.6 -1347.6
PAT Margin (%) -117.5 -78.2 -83.7 -76.3 -63.4
FY14 revenue was reportedly Rs 8b as per media reports

Balance Sheet

(Rs mn) FY09 FY10 FY11 FY12 FY13
Liabilities
Equity Capital
9.2 10.5 18.4 24.2 33.3
Reserves
169.6 213.9 823.5 1759.4 3823.5
Shareholder Funds
178.9 224.4 841.8 1783.6 3856.8
Debt
0.0 9.2 38.4 5.0 109.2
Deferred tax liability
0.0 0.0 0.0 0.0 0.0
Other Long Term Lialilites
0.0 0.0 0.0 1.4 1.9
Total Liabilities
178.9 233.6 880.3 1790.0 3967.9

Assets
Fixed Assets (net)
9.5 14.6 27.3 145.7 172.2
Investments
111.3 29.5 410.0 0.0 137.4

Inventories
2.7 5.3 21.1 365.8 547.2
Debtors
7.1 21.3 42.4 236.0 398.9
Cash
3.2 60.7 152.0 267.9 661.9
Loans & Advances
4.1 7.1 30.5 23.3 42.2
Other CA
0.0 0.0 0.0 1.6 4.2

CL & Provisions
11.9 31.6 80.6 345.4 814.9
Net Current Assets
5.2 62.8 165.4 549.2 839.5
Misc Expenses
53.0 126.4 278.1 790.7 2132.7
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Total Assets
178.9 233.4 880.7 1485.6 3281.8

Ratios

FY09 FY10 FY11 FY12 FY13
Growth (%)

Sales

149.3 92.9 270.8 216.4
PBDIT 517.4 62.1 109.9 247.6 165.3
PBT 550.9 66.0 106.4 238.0 162.9
PAT 550.9 66.0 106.4 238.0 162.9

Margins (%)

PBDIT -110.7 -72.0 -78.3 -73.4 -61.6
PAT -117.5 -78.2 -83.7 -76.3 -63.4

Balance Sheet Ratios

ROE (%) -49.5 -36.4 -28.4 -39.1 -47.8
ROCE (%) -50.4 -42.2 -33.7 -45.6 -56.6
D/E (x) 0.0 0.0 0.0 0.0 0.0
Inventory t/o (days) 12.9 15.6 26.7 105.1 78.4
Debtors t/o (days) 34.2 55.2 64.3 75.7 54.5
WC Cycle (days) -6.0 -10.6 -19.3 98.1 68.4




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