Flipkart-Walmart deal: The common idea that binds the Bansals together

With Walmart acquiring a majority stake in Flipkart, in one of the biggest e-commerce transactions the world has seen, its founders did something right

In August 2016, Sachin Bansal, founder and longest-serving CEO of Flipkart, India’s most valuable Internet startup, faced a crowd of employees who over the past six months had grown disgruntled over management changes and were worried about the future of the company. Headlines in all major Indian dailies had been dwelling on the fact that Flipkart’s investors were downgrading the value of their holdings and that the company’s biggest rival Amazon had a sure shot at overtaking it.

What Sachin did that day, not many CEOs, not even those from the largest of multinational firms, have had the courage to do. He likened his stepping down from the CEO’s post in January that year, and the departure of several of his top lieutenants, to his lack of being able to hit performance targets. For Sachin, this meant Flipkart hadn’t been able to reach the target of 100 million shoppers on its platform and maintain the growth rate it had been able to show until then.

However, what was not apparent from Sachin’s plea to employees that they needed to  shape up or ship out, was that his stepping down was, in effect, investors, particularly Tiger Global, extracting their pound of flesh. This came to the fore only a year later, when Kalyan Krishnamurthy, a close lieutenant of Lee Fixel, partner of Tiger Global, was for the second time implanted in the company to perform a clean-up and revive growth. Even before Krishnamurthy was elevated to the position of CEO in January 2017, replacing Binny Bansal at the helm, he had already begun his takeover.

This significant moment in the life of Flipkart and of its founders Sachin and Binny Bansal, who are not related, was the downfall of their dream to build a $100 billion company out of India. After being sidelined from the day-to-day running of their Flipkart, and even though they regained some prominence by leading strategic initiatives, Krishnamurthy’s goal seemed to be more in line with creating value for Tiger Global and other investors rather than building towards the moral and personal goals of Flipkart’s founders and employees.

But with Walmart now acquiring a majority stake in Flipkart, in one of the biggest e-commerce transactions the world has seen, the Bansals obviously did something right. Few can claim credit of building a $20-billion behemoth and even fewer can claim credit for doing so in the face of fierce competition from Amazon, which was backed by financial muscle and support from the top to win the India market. 

Hailing from Chandigarh, the Bansals became local heros when Flipkart’s valuation at some point of time surpassed that of Punjab National Bank. Soon, they became national heroes for building India’s most valuable startup.

People close to them, and even many in the investor community, believe they are dreamers -- they dreamt of doing the unthinkable when even such a model did not exist in India. They dreamt of building a $100 billion empire and pushed it vigorously. However, the sequence of events during the last couple of years, especially the increasing demand of the business for cash in order to continue to keep Amazon at bay, had put tremendous pressure on the Bansals, who were together holding just around 11 per cent in the company. “They gave their best and brought Flipkart to this level, which is an achievement in itself. However, there is a feeling that to take the company to the next level, it needed strong backing. That is what Walmart is bringing to the table,” said one of the earliest investors who does not wish to be named.

The one thing that the Bansals were very clear from day one is that they would not compromise on growth at any cost. There was enough scope from them to make the company profitable quite early, but their single-minded focus was to scale up the business. “We do not want to remain as a small profitable company,” both the founders had told Business Standard in a interview in 2013. “That is certainly not what we are aspiring for when the market opportunity is so huge. If one wants to focus on making profits quickly, then e-commerce is not the place. We want Flipkart to become synonymous with shopping in India.” 

Even though they are not remotely related, Sachin and Binny are just two sides of the same coin, says a former employee who has worked with both closely. They brought complementary skills to the table. Sachin is quite the workaholic, who never hesitates to spend extra hours in office. His only drawback is that “he was a bit short-tempered at times”. Binny, on the other hand, is the go-getter, cool and composed, who never compromises on his personal time. “But the one thing that made them such a good team was their absolute trust in each other,” says another person who knows both of them.

For now, Sachin has decided to move on and Binny will spend some time in the new Flipkart for the transition. Their next moves are not known. Both have have invested in a host of technologies as angel investors. “I don’t think, they will confine themselves to being just investors. They may be cooking up yet another multi-billion dollar idea,” says a Bengaluru-based technology entrepreneur who is close to both.