Walmart effect on Flipkart from 2019
‘WE ARE TRYING TO PUT TOGETHER AN AVENGERS LIKE TEAM WHO WILL GIVE FLIPKART GOOD ADVICE’ CARL DOUGLAS MCMILLON, CEO, WALMART ‘WITH THIS INVESTMENT, WE WILL BE ABLE TO TAKE MORE LONG-TERM DECISIONS’ BINNY BANSAL, CO-FOUNDER & GROUP CEO, FLIPKART
American retail major Walmart is looking at a future together with Flipkart, the e-commerce company it has bought for $16 billion, at some time in the second quarter of 2019 calendar, sources in the know said. Next April seems to be a cut-off point when the two companies are likely to have a common leader and possibly single headquarters to operate from in India.
Till then, the two will function as distinct entities and brands. A Walmart spokesperson said, “Flipkart and Walmart India will operate as distinct brands and separate operating structures with the intent to leverage the combined strengths over time. The Flipkart leadership will continue in their roles and Krish Iyer will remain as CEO of Walmart India.’’
Currently, Walmart India operates 21 cash and carry or wholesale stores across 19 cities— that’s a minuscule business when compared with the operation that it is looking at after the deal that values Flipkart at $20.8 billion.
Binny Bansal, one of the co-founders of Flipkart, is continuing as group CEO of the company even after the deal. When asked whether it was a transitional role that Binny was playing now, a source said his decision to stay or leave would be based on how things unfold over the coming months.
Walmart CEO Doug McMillon and Binny had together addressed the employees of Flipkart in a townhall meeting on Wednesday, giving a sense of who would lead the show, at least for now.
The other founder of Flipkart, Sachin Bansal, who held the designation of executive chairman, made a quiet exit after selling his 5.9 per cent stake in the company. It is learnt that the operating structure of Flipkart that emerged during the last leg of negotiations with Walmart and investors did not appeal to Sachin Bansal. A source said that he did not find it meaningful to stay in the company ‘’partially’’ referring to Walmart asking the founders to dilute their stake and other conditions attached to board positions. A source pointed out that Sachin, who had not wanted to leave till about two weeks ago and was in fact driving the deal, was already out of Flipkart. ‘’He was not invited for the townhall meeting with employees that Doug and Binny addressed,’’ he added on the condition of anonymity.
The Bentonville-based group will wait for the Walmart-Flipkart transaction to conclude before executing changes in leadership (a combination of top Walmart and Flipkart executives likely) and bringing in significant synergies, another source said. An approval from the Competition Commission of India (CCI) was the only regulatory permission required for the deal, he said. When Flipkart had raised $2.5 billion from SoftBank last year, the CCI nod had come in about two months, according to a company insider. ‘’This time it might take longer because the deal size is so much bigger and involves a retail giant,’’ he pointed out. It’s unlikely to be a hurdle, however, people dealing with the matter said.
Not only will the CCI approval take longer this time, the overall pace of doing business at Flipkart may also slow down as Walmart would bring in compliance teams as per international requirements, a senior executive aware of the systems said. ‘’Compliance requirement at Flipkart will increase, thereby slowing things down to some extent. But it will help the company to be more transparent,’’ he added.
On whether Walmart had dropped its plan for multi-brand retail in India, one of the sources said the group may not have dropped the plan but everything would be e-commerce or Flipkart-led now. On the multi-brand ambition, the Walmart spokesperson said, ‘’we believe the combined capabilities of Flipkart and Walmart will create India’s leading ecommerce platform. We will work within the appropriate policy and regulatory frameworks to accomplish that goal.’’
Meanwhile, after the exit of investors such as SoftBank and cofounder Sachin Bansal, the board composition of Flipkart is undergoing a major change. In a 10-member board, at least three will be from Walmart including ecommerce CEO Mark Lore and Steuart Walton, grandson of Sam Walton, founder of Walmart. There’s no news yet on what Sachin Bansal may be doing next. A source said he’s yet to make up his mind on what next as he’s trying to get over his parting with Flipkart. He’s believed to be spending time on new areas of artificial intelligence (AI), even coding, besides travelling, before getting back with a new idea perhaps to create a $100billion Indian company that he could not fulfill with Flipkart.