Flipkart’s Sachin Bansal says markdowns not a concern
Co-founder Sachin Bansal on Flipkart valuation, fundraising plans and the impact of demonetisation on the online retail sector
Bengaluru: To say 2016 has been a tumultuous year for Indian e-commerce’s poster boy Flipkart would be an understatement.
The year started with the biggest executive overhaul in Flipkart’s history. Binny Bansal took over as chief executive and Sachin Bansal moved on to the role of executive chairman in January.
Since then Flipkart has been in the midst of the most important market share battle in the history of India’s start-up ecosystem; India’s e-commerce business has witnessed a slowdown that led to mutual fund investors such as Morgan Stanley, Vanguard and Fidelity marking down Flipkart’s valuation multiple times; the company has witnessed multiple top-level exits and brought back Tiger Global executive Kalyan Krishnamurthy to stabilize the business.
Finally, Flipkart turned the tables on Amazon India during the all-important October festive sale after losing market share consistently to the local unit of the American online retail giant over past months.
Flipkart’s successful Big Billion Day sale in October has given the e-commerce giant a fresh boost in its latest fund- raising efforts, although recent valuation markdowns have queered the pitch somewhat.
In an interview on the sidelines of the Carnegie Global Technology Summit, Sachin Bansal brushed off any concerns around the recent markdowns and termed them “theoretical exercises” that would have no impact on Flipkart’s actual valuation when it next raises funds. Edited excerpts:
We understand you have spoken to Bhavish Aggarwal at Ola, Paytm’s Vijay Shekhar Sharma and Snapdeal’s Kunal Bahl, among others, to be part of this new lobby group for start-ups. What will be the broad agenda of this group?
It’s mainly an informal group. We keep meeting on a regular basis and talk about all kinds of things that we can collaborate on and help each other on—and of course, that’s something that is not unique to India. That’s something that happens in every sector in other countries also. Right now, we’re not thinking of a formal group—if it naturally progresses into something like that, then it’s fine. Otherwise we will keep it informal.
Demonetization has proved to be a setback for Indian e-commerce. Do you think e-commerce companies are still far from ready for the transition to cashless?
...what (demonetization) has done is (it has) opened an opportunity for digital payments to fill the vacuum that has been created by cash. And this vacuum will be there for sometime, for the next few months. And after that, it will be filled by cash again. And until that time, if you’re able to move a significant number of users and transactions to digital methods such as UPI (unified payment interface), credit cards and debit cards, that is something that we are looking forward to and that is already happening—there is a lot of positive impact.
I believe business will stabilize in a few months, but hopefully we will not settle down at the same level of cash usage as it was before in the overall economy and hence in e-commerce as well.
What do you make of the recent valuation markdowns? How big a setback is it ahead of your latest fundraising?
These are theoretical exercises. See, we are not a public company, so we don’t release our numbers publicly. Any investor who has an opinion on our valuation outside, including who are already invested in us, they are doing it (markdowns) based on some public information which is accessible to everybody... It’s a very uninformed opinion of somebody. So, I think it’s a theoretical exercise—as we’ve always said, valuation is what will happen when a real transaction takes place and not just on paper.
Do you expect investors to be willing to meet Flipkart’s terms this time? Or are you factoring in the possibility of a down round?
We don’t have to think about that at all. I think the business is doing pretty well and overall sentiment (on e-commerce) is improving. Global sentiment around investment is improving as well. So, I don’t think it will get to that.