Dear Walmart-Flipkart, we need some answers

Will the protagonists in the $16-billion deal answer these 10 questions please?

It’s been a week since the world’s largest M&A deal in the e-commerce space was struck, and curiosity around the transaction has only grown. To help us crack the puzzle of the $16-billion Walmart-Flipkart deal, will the protagonists or the stakeholders answer these 10 questions please?

Question #1: Why did the American retail giant Walmart decide to put $16 billion for a controlling stake in a lossmaking ecommerce company Flipkart? Surely, it could have done things differently, possibly like Amazon did — starting an online business on its own in India. True that Walmart is no match for Amazon’s international e-commerce expertise, but the Bentonville, Arkansas, retailer is not exactly a beginner in the space. Amazon’s India investment in a little less than five years is pegged at $5 billion. In comparison, Walmart’s $16 billion to enter Indian ecommerce looks outrageous.

Question #2: Why did Amazon put its bid, which looked unattractive and almost half-hearted, so late in the day to bag Flipkart? The breakup fee of $2 billion on top of a bid to match Walmart’s offer did not look like a genuine effort to acquire the Bengaluru firm that it has been competing aggressively with. Sure, a Flipkart-Amazon combine would have found it hard to pass the CCI (Competition Commission of India) test, but will someone explain the guest appearance of Amazon in what was seen as a done deal between Flipkart and Walmart. In fact, industry whispers are that top representatives of Flipkart had not too long ago approached Amazon proposing a stake sale. But it seems the belief in the Amazon camp was that Flipkart would not be able to withstand the competition from the American ecommerce major anyway and would gradually fade away; so it didn’t make sense to the Seattle biggie to spend money in acquiring a stake in Flipkart. If those whispers are to be believed, Amazon clearly underestimated Flipkart’s potential and wanted to rectify its stand by making a bid. Still, things refuse to add up.

Question #3: Why did the largest investor in Flipkart, SoftBank, give up during the negotiation? SoftBank founder and CEO Masayoshi Son was backing Amazon to buy a stake in Flipkart. Most others on the deal table were supporting Walmart. It’s not known at what point Son decided to give up. Question #4: Why did Son speak about the deal to investors ahead of an announcement by Walmart, and then why did he say he would take some more days to decide whether he would sell his stake in Flipkart or not? Looks like there’s something more that has not been said. Tax liability and stepping up investments in Paytm, where Alibaba group holds considerable share, may not be the only reason for Masa’s rethink.

Question #5: Was the Walmart-Flipkart deal stitched in a hurry? If the largest investor SoftBank is undecided on its stake sale, putting things on hold for a week or so, one wonders why the deal couldn’t wait for a few more days till Masa made up his mind.

Question #6: Why exactly was Flipkart co-founder Sachin Bansal forced to step down? Sachin’s absence at the townhall with Flipkart employees on the day of the deal was a giveaway that the end was unpleasant for the person who has been breathing Flipkart ever since he and friend Binny Bansal founded the company in 2007. Sachin said so in a Facebook post. Later, a person in the thick of things pointed out Sachin was heart broken, to say the least. Even more important, Sachin wanted to stay on irrespective of whether Amazon or Walmart was the buyer.

Question #7: If Sachin was not forced to step down, as the Walmart camp suggested, was he looking for a stake sale bounty? From the 5.9 per cent he held in Flipkart, he could make around $1.5 billion. But someone who knows Sachin well said he’s not into French villas and the like, he does not know what to do with the sudden wealth, except that he might find the money useful if he starts up again.

Question #8: On the assumption that Sachin wanted to break free, is there a possibility of another startup coming up soon, on the scale of Flipkart? The cofounder who’s already out of Flipkart is undecided still, it seems. People who know him say he would try to build a $100-billion company that he wanted Flipkart to be. But past examples suggest a second startup on a similar scale is hard to come by for a founder.

Question #9: Why is it that a Walmart majority in online retail is acceptable (other than some symbolic protests by traders) but a Walmart in big box physical retail (read multibrand retail) is an outlaw? After all, the impact on mom and pop stores and jobs would not be too different whether foreign money is going into physical shopping or online.

Question #10: Is Walmart’s multi-brand dream in India still alive? Nobody quite knows, though omni-channel is the buzzword to follow.