Even after its acquisition by Walmart, Flipkart will continue to be run by its board of directors, top executives at both companies said.
On 9 May, Walmart agreed to pay $16 billion for a 77% stake in Flipkart. The deal has been structured in a way so as to allow for a public listing of Flipkart in a few years’ time although most analysts have cast doubts about an IPO happening any time soon, given Flipkart’s large losses.
Flipkart co-founder and group CEO Binny Bansal, Walmart chief operating officer Judith McKenna, Walmart India head Krish Iyer and Walmart executive vice president Dirk Van den Berghe spoke to reporters at Walmart’s headquarters at Bentonville in the US state of Arkansas about the way ahead for Flipkart. Edited excerpts:
Binny, you had been running Flipkart for more than 10 years. You were your own boss. What will it be like to work for somone else after such a long time?
Bansal: Thankfully, nothing is changing on that front. Flipkart has been a board-run company and with Walmart coming in as an investor the operating structure doesn’t change and Flipkart will still be a board-run company. Members of the board will change a little bit but I will continue to report to the board.
Judith, till when will Walmart have to keep funding Flipkart? When does it expect Flipkart to reach profitability?
McKenna: We recognise that this is not a short term investment, this is a long-term investment. We can’t disclose (our investments plans over the next five years).
Why are you looking to bring new investors on board at Flipkart?
McKenna: We see it as a way of increasing funding available to the business if that’s what we choose to do.
Bansal: We already have some financial investors like Tiger, Accel… Bringing new financial investors won’t change the shape of the board. It will help in making an IPO a reality.
What are the immediate synergies between Walmart and Flipkart?
Bansal: We’ll be looking at Indian sellers selling on different Walmart properties across the globe. Not just bringing stuff to India, but also taking stuff to the world.
Van den Berghe: That’s the biggest part of the synergies, the fact that it goes in two directions.
What are Flipkart’s plans for the grocery business?
Bansal: We started grocery in Bengaluru a few months back. Launching a category takes a lot of effort with building a supply chain, getting vendors on board… we started thinking about how we wanted to do grocery two years back. It’s still an experiment but we’re really excited about the results. The plan is to launch it in another four cities over the next two or three quarters. What we’ve learnt is that every city is going to be very different. The next two years are going to be a learning period for us in grocery and then we will look to scale it after 2020.
There’s growing political opposition to the deal. Do you expect that to delay the closing?
Iyer: This investment is under the automatic route. The only approval required is the CCI (Competition Commission of India) approval. We believe that we’ve met all the legal requirements fully so we do not expect any hurdles.
When foreign companies make acquisitions in India they tend to have a couple of positions like legal and finance reporting into them. Will that be the case here?
McKenna: Yes, it will be for three key positions: legal, compliance and finance. The Flipkart team absolutely have a say in (those appointments). But the objective is to operate through the board structure which is exactly how they operate today.
What will be the focus for Flipkart: margins or growth?
Bansal: We’ve grown really fast but e-commerce is still only 2.5% of the whole retail market so there’s a lot of room to expand. E-commerce businesses become profitable at a much larger scale – we’ve seen that across the globe. So there’s a long way to go from a scale perspective. We also have Myntra and Jabong. It is well-known that fashion businesses are more profitable, so having those assets will help us get to profitability faster. Our view is that for the near-term future our focus is going to be on scale and growth. There was a clear meeting of the minds with Walmart that they want us to focus on expanding the market and getting more and more new customers to Flipkart.
Do you have a strategy to reach out to the traders who are at the forefront of the opposition to the deal?
Iyer: The kiranas whom we work with, we have 1 million members. The kiranas we work with and whom we’ve helped with the GST transition are extremely loyal to us. And our business continues to grow at double digits. Our number of transactions continue to grow and we continue to sign new members. So, on the ground what I see is very different from what I read in the papers. We have a good connect with our kirana members.