In early 2013, Flipkart was in trouble. It had become the early leader in a nascent e-commerce market, received some $200 million in venture capital and fetched a valuation of around $1 billion. But it was besieged by problems: its losses had soared beyond control; sales growth was lower than its co-founders Sachin Bansal and Binny Bansal had promised investors; it was in the middle of a gruelling investigation by the Indian government related to foreign direct investment (FDI) laws; and the entry of Amazon.com Inc., the giant American online retailer, into India was imminent.
More than three years later, the company faced a worse crisis of its own making. By then, Flipkart employed more than 30,000 people, had raised more than $3.5 billion in capital and was valued at $15 billion, making it by far the country’s most valuable Internet company. Yet, after a series of missteps, Flipkart was losing tens of millions of dollars every month and struggling to increase sales even as Amazon, its role model, was expanding at a rapid pace. Despite changing its chief executive, replacing Sachin with Binny, things weren’t improving much.
On both occasions, the company turned to Kalyan Krishnamurthy, a key lieutenant of Lee Fixel, global head of private investments at Flipkart’s largest investor Tiger Global Management and the company’s metaphorical godfather.
In his first stint starting May 2013, Krishnamurthy, as Fixel’s man on the ground, was initially feared. Pretty soon, however, first as interim finance chief and then as sales head, he won over Flipkart employees with his straightforward personality and deep knowledge of e-commerce. Krishnamurthy spoke directly with junior colleagues and immersed himself in day-to-day matters—“So, what do you do?” “How does this work?” “What’s the process for this?”—rather than just “strategize”. He became a mentor to many senior and middle managers.
In his second stint, Krishnamurthy, as de facto sales head, began by removing at least four senior executives in the key but struggling retail business that was responsible for generating sales. Two of these executives were Krishnamurthy’s protégés from the first stint—people he had mentored and promoted to important roles. The message to the rest of the organization was clear: if you don’t deliver, you will be cast away without a second thought.
The firings had the desired effect. It shocked the retail organization, which had become bloated, complacent and directionless, into action, kick-starting a life-saving turnaround process that would culminate in Flipkart outselling Amazon India in the October festival season sales face-off that was the equivalent of a knockout match for Flipkart.
In doing so, Krishnamurthy helped end Flipkart’s long crisis and restore confidence in the company that it could hold its own against Amazon.
On Monday, Flipkart said Krishnamurthy, who was parachuted to the company for a second spell only last June, will replace Binny Bansal as chief executive officer (CEO) of Flipkart, exactly one year after Binny had replaced Sachin. Binny will become Flipkart group CEO. Ananth Narayanan, CEO of Flipkart’s fashion units Myntra and Jabong, and Sameer Nigam, CEO of Flipkart’s payment unit PhonePe, will continue reporting to Binny. Krishnamurthy will now control all of Flipkart and report to Binny.
Krishnamurthy’s elevation marks a major landmark for the start-up ecosystem: he has become the first so-called professional CEO at a large Indian start-up.
Krishnamurthy, who turns 45 on Thursday, will not get a better birthday gift.
His main objective will be to make the budding Flipkart turnaround last. He’s facing heavy odds. The company needs a fresh round of funds but it struggling to attract new investors at its preferred valuation of $15 billion. Most investors say Flipkart has resigned itself to the dreaded down-round in order to get desperately-needed new capital. They also say that after running neck-and-neck with Flipkart only three years after launching, Amazon, with its established tech and retail expertise, is likely to become the top e-commerce company in India at some point. Then there’s the awkward question of the dynamics at play between Krishnamurthy, the Bansals and Fixel, whose firm owns 30-33% of Flipkart. Will the Bansals, who together own 14-15% of Flipkart, back Krishnamurthy, the former Tiger man who effectively ensured they have very little to do with the day-to-day running of the company they founded?
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For now, Krishnamurthy is driving Flipkart’s operations and the company is still marginally ahead of Amazon at the top of India’s $15 billion e-commerce market.
Flipkart has declined interview requests with Krishnamurthy since September for this story, including an emailed request in October. The company agreed to make Binny Bansal available for an interview for this story in late December but postponed it at the last moment without specifying another date. Both spoke to Mint after Monday’s announcements but did not address any of the issues raised in this story.
Krishnamurthy has played a unique role in shaping India’s start-up ecosystem. Among investors in India, there are many entrepreneur/executive-turned-venture capitalists (VCs) such as Matrix Partners’s Avnish Bajaj, Inventus’s Rutvik Doshi and Accel Partners’s Subrata Mitra. Fewer VCs have gone the other way and shifted to executive roles. One investor, Sandeep Murthy, founder of VC firm Lightbox Ventures, ran travel portal Cleartrip and worked in senior roles at InMobi while he was an investor at Kleiner Perkins and Sherpalo Ventures. But no one has held such an important and challenging executive role and helped manage a portfolio as large as Tiger Global’s, sometimes simultaneously. Despite his sizeable accomplishments, not much is known about Krishnamurthy outside of Flipkart circles and a small group of investors. That’s because like his other Tiger Global colleagues, Krishnamurthy generally avoids reporters.
Mint spoke to more than two dozen people who have worked with Krishnamurthy, including former and current Flipkart executives, entrepreneurs and fellow VCs for this story. According to them, Krishnamurthy is a quintessential behind-the-scenes person who has an exhaustive understanding of e-commerce. He works long hours relentlessly, is blunt and ruthless and yet inspires confidence and loyalty. It helps that he’s as fluent in Hindi as he is in English. And in his mid-40s, he’s also nearly a decade older than the Bansals, a stabilizing, predictable presence with a less volatile temper. More than anything, his instincts on e-commerce are uncommonly accurate, these people said.
Not that Krishnamurthy has a spotless record. His business finance and retail teams were at least partially responsible for the pricing fiasco in the first Big Billion Day sale in October 2014, when customers alleged that Flipkart intentionally pushed up the prices of some products so as to make its discounts seem bigger. For a CEO of a top e-commerce firm, he is said to lack a deep understanding of technology and products. Krishnamurthy is also said to favour short-term fixes over long-term bets entrepreneurs pride themselves on.
On the whole though, the Tiger Global man gets more things right than wrong, former and current Flipkart executives said. He knows how much inventory to buy, which bets will pay off, how to bring key brands on board and how to undercut rivals. In a business where schadenfreude (a German term meaning pleasure derived from the misfortunes of others), fault-finding and pettiness are as common as dreams of changing the world, it is rare for a person to be regarded this highly by so many people.
“He’s great with numbers but so what? There are many people who are great with numbers. What’s unique about Kalyan is that he’s a people’s person in the sense that he’s very straightforward. You know where you stand with him. He doesn’t entertain high talk about vision and all that. Combined with the fact that his understanding of e-commerce is so deep and wide, you can learn a lot from him,” one of the people cited above said.
His black hair highlighted by flecks of grey, Krishnamurthy is of average height. He is married to a homemaker and is father to two young daughters. He lives in a posh villa complex near Flipkart’s offices on Outer Ring Road in Bengaluru and drives a Mitsubishi Pajero to work. His neighbours include several senior executives at Flipkart and some of the city’s corporate leaders such as InMobi’s Naveen Tewari, Wipro vice-chairman T.K. Kurien and former Wipro CEO Suresh Vaswani. In office, he is seen in a collared t-shirt (sometimes in tees with the Flipkart logo) atop blue jeans in keeping with Flipkart’s culture of dressing down; most “Flipsters” (as they are called internally) typically wear smart casuals. Krishnamurthy is a vegetarian and prefers South Indian food. He works out regularly and practices yoga and has a single-minded focus on work.
Before joining Tiger Global in May 2011, Krishnamurthy, who holds an MBA in finance from the University of Illinois, held senior finance roles at online marketplace eBay Inc. in Hong Kong for nearly seven years. He also worked at consumer goods giant Procter and Gamble Co. in a supply chain finance position, according to his LinkedIn profile.
When he became Flipkart CEO in January 2016, Binny Bansal inherited a mess. Two of Sachin Bansal’s big bets in 2015—the marketplace push and the app-only experiment—had failed, meaning that Flipkart missed its sales targets in 2015 and saw its losses soar. As damaging was the side-effect of the marketplace push: Flipkart’s vaunted customer service and brand took a beating. Sachin was replaced by Binny as CEO in a move that is now widely seen as having been either pushed by the company’s board of directors or in fear of some drastic action by the board.
As CEO, Binny Bansal cut monthly losses and stressed bringing the company’s service levels back up. He was also shifting the company back to a retail-heavy inventory model (in which it buys and sells products) and undoing the marketplace move led by his predecessor and co-founder, Sachin. Binny also oversaw the departures of three of Flipkart’s senior-most leaders: Ankit Nagori, Mukesh Bansal and Punit Soni, leaving no doubt about who was in charge.
However, despite Binny’s best efforts, Flipkart just couldn’t increase sales, which actually declined in successive months starting April. All this while Amazon India, which was less than half of Flipkart’s size just a year ago, was rapidly closing in on Flipkart. Its move back to a retail model was also flailing.
The board of directors, namely Tiger’s Fixel, Accel Partners’s Subrata Mitra and Naspers’s Oliver Rippel, was getting restless. Fixel, the rising start-up investment star, was particularly anxious. He had staked his reputation on Flipkart, pouring almost $1 billion into the company that he believed would be his most lucrative investment ever. Now, it was in danger of collapsing—so dire was Flipkart’s plight.
Krishnamurthy was an obvious fit. He had played a key role in getting Flipkart to its peak in 2014. He had held a seat on its board of directors. He had an established rapport with a handful of key Flipkart executives who were still around from his first stint and, as Fixel’s man, no one could question his authority. He knew what had to be done and enjoyed the trust of the board and investors.
In mid-June, Krishnamurthy was appointed as head-category design at Flipkart. Regardless of the strange title, he was given charge of Flipkart’s marketplace and retail business. His mandate was to revive sales growth while keeping spending under control.
His return to Flipkart was a stark indictment of Flipkart’s recruitment spree of 2015, when it paid tens of crores of rupees in compensation to replace its management team with executives from Google Inc., McKinsey and Co. and other blue-chip companies. The Bansals often say that the company has a world-class management team. Yet, the board didn’t have confidence in any of the high-profile executives to do the job.
“When push came to shove, we had to bring back Kalyan. If Flipkart had actually hired and (assimilated the high-profile executives) well, we’d have had enough people who could’ve taken up the role and we wouldn’t have needed him. But it was obvious he was the only guy possible at that point,” a Flipkart executive said.
“That point” was when the company was arguably at its lowest.
Krishnamurthy spent the first week meeting all the firm’s key leaders, asking pointed questions about their roles and the performance of the businesses they were overseeing and “listening more than talking”. He called for a meeting of all key Flipkart executives. The tone of the meeting was unmistakable: pull up your socks and deliver or leave.
“I’m happy to have come back and I’m looking forward to working with everyone —there’s obviously a lot of work to be done,” one executive quoted Krishnamurthy as saying.
The timing of Krishnamurthy’s comeback also had to do with the fact that the key festive season period was looming. Flipkart was roughly three months away from its Big Billion Day (BBD) festive sale, a week-long exercise that is crucial for all e-commerce firms.
Krishnamurthy’s most important immediate responsibility was to pull off a successful BBD and ensure Flipkart didn’t lose to Amazon in the festive period, when e-commerce firms generate a disproportionate amount of their annual sales.
He started by removing four managers who held key positions in the retail unit. He pushed back Binny’s plan to introduce private label products ahead of BBD. He brought back two old hands, Amitesh Jha and Sandeep Karwa, to business roles, and charged another, Ayyappan R., with a key position in the smartphone business.
The retail team returned as the driving force of Flipkart, a process that had been started by Binny. The product team was relegated to playing a secondary role, a reversal of Sachin Bansal’s attempt in 2015 to turn Flipkart into a so-called product company where the product team would call the shots and the rest of the organization would follow.
Since starting out in 2007 as an online bookseller, Flipkart had risen to the top by adopting Amazon’s model of selling products directly to customers and having a supplementary marketplace business of third-party sellers who added variety to the company’s product assortment. This allowed Flipkart to control the quality of its products and service, which was crucial in building trust with Indian shoppers who were wary of online shopping (most still are). But inspired by the latest trends in the tech world and his frequent visits to Silicon Valley and China, Sachin Bansal wanted to convert Flipkart into a pure tech platform. In his vision, Flipkart would connect customers with merchants around them through geo-mapping technology, and provide other “soft” services. This vision of tech utopia also prompted his app-only experiment, where he was betting that customers hooked to their smartphones would use the device, which facilitated immediacy, convenience and a superior experience, exclusively for all their commercial transactions.
The results were disastrous.
Binny dismantled this vision after becoming CEO and tried returning Flipkart to its Amazon-ian roots; Krishnamurthy actually implemented and consummated the change.
More than anything, Krishnamurthy brought decisiveness back to the company. In 2015, Flipkart was in chaos after being split into three units, undertaking a complex shift to the marketplace model and attempting an app-only push. The company faced the growth pangs that strike any start-up which grows too fast too soon and tries to become a more organized, large company. Very few firms manage to stumble through this phase and emerge stronger. Flipkart ended up in the other category of companies that mess it up, though few have done it as spectacularly as Flipkart did in 2015.
The chaos at Flipkart reduced significantly after Binny became CEO. But it was replaced by confusion. The company just couldn’t figure how to achieve three clear objectives all at the same time: increase sales, cut losses and improve customer service. Its task was made tougher by the fact that Amazon was pumping in hundreds of millions of dollars.
In its heyday, Flipkart was an agile company that used to execute everyday business moves on inventory purchases and payments to exclusive brand partners with impressive speed. But because of the conflicting objectives, it lost that ability. Between Sachin Bansal and Binny Bansal, the former is the instinctive one who was more of a strategy-setter while the latter was known for his execution skills and his aptitude of getting things done.
But, as CEO, Binny was found wanting in precisely this aspect. He made things worse by appointing leaders in sales roles who weren’t suited to the jobs.
In Krishnamurthy’s case, day-to-day business decisions is where he excelled.
For BBD, Krishnamurthy pulled the same levers that had catapulted Flipkart to become the country’s first Internet company to hit more than a $1 billion in gross sales in 2014: lure the biggest-selling smartphone brands on board, offer the lowest prices on high-value items such as phones and televisions and get these products to customers reasonably fast. Amazon could win in smaller categories such as books and everyday consumer products but Flipkart had to dominate sales of the high-value items such as smartphones, which accounts for more than half of all online retail in India.
Flipkart had pioneered the exclusive brand model in 2014, when deals with smartphone brands Motorola and Xiaomi pushed its gross sales into the billion-dollar range. The exclusives lost money but they brought in hundreds of crores of rupees in sales. In 2015, a mixture of complacency and unwillingness to keep spending money on these deals meant several brands, including Motorola and Xiaomi, shifted to Amazon and drove that platform’s business.
Many of these brands, including Motorola and Xiaomi, or at least many of the latest smartphone models of these brands, came back on an exclusive basis to Flipkart under Krishnamurthy, who personally led talks with key electronics brands. He convinced them that despite bumps in the past few months, Flipkart was still India’s most popular platform and that BBD, in particular, was unrivalled in its resonance with customers, India’s equivalent of Singles Day in China.
“As far as BBD is concerned, for us Kalyan played the decisive role. He was dealing with us directly. Whereas with Amazon, it was a category head. There’s nothing wrong with that but it’s just that Kalyan’s presence showed us how much Flipkart wanted the deal,” a senior executive at a top smartphone maker said.
Krishnamurthy set up a BBD “task force” headed by Sriram Venkateswaran, senior director of supply chain. This task force was stationed inside Flipkart’s Koramangala headquarters—a team of about 15 people, many of them from logistics arm eKart. Instead of packing the team with senior-level executives, Krishnamurthy chose 15 people across levels who had a track record of executing well. The unit would look at reports around orders, among other things, and ensure that operations ran smoothly without a glitch.
“The task force that was created to ensure that whatever we are promising to consumers or whatever we are trying to do should be backed by stellar services— especially when it comes to delivery, when it comes to installations and all of those things,” a Flipkart executive said.
As Krishnamurthy was putting in place the building blocks of the BBD, Amazon had raced ahead of the company in July (for the first time), August and September on the basis of gross sales, or value of products sold on the platform after discounts. Krishnamurthy tracked Amazon’s numbers obsessively. He sought detailed sales numbers of each of Amazon’s categories.
Now, Amazon’s ascendance meant BBD assumed even more importance.
Flipkart was prepared with exclusive brand offerings that included Samsung’s Galaxy On8, Motorola’s E3 Power, LeEco and Xiaomi’s Redmi 3S as well as important exclusives on television sets.
It comfortably beat Amazon on the back of these exclusives and attractive prices during BBD and in the month of October.
Flipkart, including Myntra and Jabong, is said to have generated gross sales of over Rs5,000 crore in October; Amazon’s number stood at Rs4,000-4,500 crore.
Flipkart even taunted Amazon, saying that its sales numbers included only physical goods and not virtual membership and low-cost items like “churan, hing, candy, detergent bar and eggs”. This came after Amazon said that its biggest-selling product during the sale was the Prime service membership and everyday consumer goods were also among its most popular products.
Amazon India chief Amit Agarwal shot back, saying that the company had accomplished in three years what Flipkart hadn’t despite launching much earlier and acquiring several companies including Myntra and Jabong.
But Amazon was clearly rattled. Flipkart’s swagger was back.
Another important sign of Flipkart’s revival was the return of its ability to come up with, and implement quickly, clever business innovations. Remember, this was the company that had made online retail in India possible by introducing cash on delivery at scale in India in 2010. Since then, and even after the entry of Amazon, it was Flipkart that led the expansion of online retail in India primarily through the introduction of low-cost, high-quality smartphones. In this BBD, it again executed sizeable innovations smoothly. The no-cost EMI initiative introduced by Binny in May and a product exchange scheme, both of which facilitated purchases of higher-priced items such as TVs and smartphones, were winners for Flipkart in the festive season battle.
What of the Bansals?
With BBD, one thing was clear: Krishnamurthy was in full control of the show (and effectively, of Flipkart). In late August, Flipkart announced an organizational change, putting Krishnamurthy in charge of its marketplace, retail and advertising businesses. The heads of marketing, private label, marketplace and customer experience product together reported to Krishnamurthy while Binny retained control of Flipkart’s eKart and the technology, finance and administrative functions.
On paper, Krishnamurthy reported to Binny, but in practice he was pretty much his own man and answered only to the board.
Krishnamurthy’s exit in 2014 was brought about partly by his clashes with Sachin Bansal. At that time, despite the fact that Krishnamurthy was a Tiger Global representative, Fixel didn’t challenge Bansal, who had consistently impressed him with his vision and performance. (Eventually, Krishnamurthy left Flipkart in November 2014 and returned to Tiger, managing the firm’s investments in India.)
Recently, when a start-up CEO asked Fixel about Flipkart, he said, “Kalyan is doing a great job over there.”
After Binny became CEO, many Flipkart executives and the investor community said he was the only one who could drag the company out of the hole it had dug itself into. But five months into the job, there were no signs of a turnaround in sales, prompting the board to bring Krishnamurthy back.
After joining the firm, the Tiger man was firmly in charge of most of Flipkart.
“Binny (wasn’t) too happy that (Kalyan was effectively running most of Flipkart). He is a very hands-on kind of leader so he obviously resented this. But the point is, he couldn’t do anything about it,” a former Flipkart executive said.
Given the situation, it was somewhat inevitable that Krishnamurthy would be given a bigger role.
It’s not the end of the road for the Bansals though. Under the new structure, Binny continues to be at the helm of the affairs of the overall Flipkart group. Sachin, as executive chairman, will work closely with Binny and provide guidance to Flipkart executives.
“We are now ready to build the Flipkart of the future as we continue on our journey of transforming commerce in India through technology. I am confident that this new organization structure will deliver further value for Flipkart group,” Binny said in a statement on Monday.