Global Fashion Group (GFG), backed by Germany’s billionaire Samwer brothers’ Rocket Internet SE (ETR: RKET), has agreed to sell its Jabong fashion e-commerce site in India to Flipkart’s Myntra, for $70 million in cash. The deal is subject to customary closing conditions and is expected to close during the third quarter.

Flipkart, based in Bangalore, India, is an online shopping destination founded in 2007 by Sachin Bansal and Binny Bansal (not related). The company offers over 20 million products across 70+ categories. Flipkart, started by a team of 2 is currently 20,000 people strong and has 26 million registered users clocking over 8 million daily visits. Flipkart’s technology has enabled them to deliver 5 million shipments per month.

Flipkart’s last fundraising round in May 2015 had pegged its valuation at $15 billion. In May 2016, Morgan Stanley lowered Flipkart’s valuation to $9.39 billion.

Flipkart had acquired Myntra for $330 million in 2014 in a bid to expand its customer base and fortify its leadership position in the online fashion market, a high-margin category that allows companies to cut the losses incurred in other segments, where profit margins are razor-thin amid deep discounts. In March, Flipkart infused 3.38 billion rupees ($50 million) into Myntra.

“Fashion and lifestyle is one of the biggest drivers of e-commerce growth in India,” said Binny Bansal, chief executive of Flipkart, India’s largest e-commerce company. “This acquisition is a continuation of the group’s journey to transform commerce in India.”

The deal will bolster Flipkart’s position in the online fashion market — the fastest growing category in India — amid intensifying competition from archrival Amazon.com that has been briskly expanding in the south Asian nation, according to Nikkei. Fashion-focused shopping sites have been mushrooming over the last few years, as a growing population of Indians shop for everything from phones to clothes and accessories on the Internet.

“Through the sale of Jabong, we are achieving a milestone in our strategy to refocus and invest in our core markets that show both, significant growth and revenue potential but also a clear and predictable path to profitability,” said Romain Voog, CEO of GFG.

“We are pleased with the outcome of Jabong’s strategic review and will now focus all our energy and capital in driving the growth of Lamoda, Dafiti, Namshi, The Iconic and Zalora across their 24 countries of operation,” said Lorenzo Grabau, chairman of GFG and CEO of Kinnevik, GFG’s largest shareholder.

With net revenues of €126m and adjusted loss of €56m for the 12 months ended March 31, 2016, Jabong represented 13% of GFG’s net revenue and 22% of adjusted EBITDA loss.

Founded in 2014 through the merger of six growth-markets oriented businesses, GFG is an international fashion and accessories e-commerce and marketplace group. Its current operations include Lamoda in Russia and the former CIS, Dafiti in Latin America, Namshi in the Middle East, The Iconic in Australia and New Zealand, Zalora in South East Asia, and Jabong in India. For the 12 months ended March 31, 2016, GFG generated €977m in Net Revenues and €(255)m in Adjusted EBITDA. Global Fashion Group was founded in 2011 by Swedish Investment AB Kinnevik and German Rocket Internet SE.

Rocket Internet founders, brothers Oliver (CEO), Marc and Alexander Samwer.

Rocket Internet founders, brothers Oliver (CEO), Marc and Alexander Samwer.

Rocket Internet was founded in 2007 by Oliver, Marc and Alexander Samwer, once considered among “the most successful businessmen on the web,” and labeled as “Germany’s Internet Kings,” by Der Spiegel. The company was established with the mission to become the world’s largest Internet platform outside of the United States and China. The company identifies, builds, scales and retains ownership of Internet companies, mainly in three sectors: e-commerce, marketplace and financial technology, in Africa, Asia Pacific, Latin America and the Middle East. It now has more than 30,000 employees across its network of companies, which are active in more than 110 countries across six continents. As of July 26, 2016, Rocket internet had a market capitalization of €2.88 billion ($3.16 billion).

Photo (above, L-R): Flipkart founders Binny Bansal (CEO) and Sachin Bansal (Executive Chairman).

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