Flipkart deferrals make IITs wary of start-up hiring

IIT panel plans to make it mandatory for start-ups to disclose source of funding, balance sheets after Flipkart defers IIM hires’ joining date

A host of start-ups other than Flipkart have failed to meet their hiring and placement commitments to the IIMs and IITs. Photo: Indranil Bhoumik/Mint
A host of start-ups other than Flipkart have failed to meet their hiring and placement commitments to the IIMs and IITs. Photo: Indranil Bhoumik/Mint

Bengaluru: India’s top engineering colleges will meet next week to discuss a strategy that may put onerous conditions on start-ups that seek to hire from their campuses after Flipkart Ltd, a top recruiter at these schools, deferred the joining date of B-School graduates hired by it by six months.

The All IITs (Indian Institutes of Technology) Placement Committee will aim to come up with a well thought-out start-up placement strategy, said Kaustubha Mohanty, convener of the panel.

This isn’t just a Flipkart problem. A host of other start-ups have also failed to meet their hiring commitments to the Indian Institutes of Management (IIMs) and IITs, the most sought-after educational institutions in India.

Flipkart, India’s largest e-commerce firm, has deferred by six months the joining date for graduates of IIMs to whom it made job offers, as the company looks to cut costs amid a funding crunch, Mint reported on 25 May.

Flipkart said the delay was largely due to a corporate restructuring that the company is currently undergoing. The company said it will be paying an additional joining bonus of Rs.1.5 lakh to all campus recruits.

At IIM-Bangalore, Hopscotch and CarDekho joined the list. At IIT-Guwahati, Roadrunnr and Click Labs have deferred the joining date of their hires.

Overall, 150 students across IITs may be affected by these start-ups’ decision to delay the joining date, said Mohanty, adding that the list of such companies may get longer.

“When Flipkart made me an offer, I was over the moon,” said a 25-year-old computer science post-graduate student from an IIT, who did not want to be named.

The country’s largest e-commerce firm promised him a salary of more than Rs.20 lakh, at least Rs.2 lakh more than the average salary offered to someone with a similar profile.

He got a letter from Flipkart this month pushing his joining date from June to December. Flipkart is looking to save costs amid a funding crunch.

“I picked Flipkart over Adobe. I knew Flipkart was making losses and was having troubles, but I didn’t know the extent of its troubles,” the student said.

Flipkart’s decision to defer the joining date for the students it hired from many top educational institutes came to light this week after a scathing letter from IIM-Ahmedabad to the company’s management was made public.

“Rude shocks due to unilateral decision-making does little to help strengthen relationships with the campus,” the letter addressed to Flipkart co-founder Binny Bansal and human resources head Nitin Sethi said.

To help students, the IIT committee plans to consider making it mandatory for all start-ups to disclose their source of funding and their balance sheets.

“We have companies with just four employees offering Rs.20 lakh salaries. It is quite absurd,” Mohanty said. “This will help us assess the health of these companies and carefully choose.”

The institutes may also bring in start-ups for placements only after established companies get to recruit from the campuses.

“We will educate our students about the risk of joining start-ups. And still if they want to, they can go ahead. But definitely we will not be giving our day-one slots to these companies,” Mohanty said.

The strategy makes sense for a simple reason: the best students often get placed on the first day of the hiring season.

“On Day One, some of the brightest talent gets placed. These are students with high CGPAs (cumulative grade point averages). So it is naturally upsetting that these students who chose companies like Flipkart over other companies now don’t have a safety net,” said Babu Viswanathan, placement adviser at IIT-Madras.

In fact, Viswanathan thinks start-ups should be allowed to recruit after the end of the financial year.

“We are thinking of letting start-ups recruit in April so that they have better visibility on their hiring requirements,” he said.

Placements at the IITs begin in December. Last year, Flipkart made offers to students at the IITs on the first two days of placements, offering annual salaries between Rs.20 lakh and Rs.30 lakh.

To be sure, Flipkart made only seven offers at IIT Madras in the 2015-16 placement season versus 19 in the year-ago period.

While Flipkart officially deferred the joining date for graduates of the IIMs, Mint learnt that it was considering doing the same with its recruits from other premium schools, including the IITs, but changed its mind following the ruckus its decision has caused.

Other e-commerce companies have been approached by the IIMs and IITs to consider hiring these students.

Paytm and Ola have agreed to explore the opportunity, spokespersons for the companies said.

So will this fiasco hurt the brand image of start-ups such as Flipkart and make it more difficult for them to hire top talent from these institutions? Certainly, experts say.

“Campus hiring is a well-planned activity for most companies and they plan and budget for the positions, headcount, office space well in advance. This type of a knee-jerk reaction so late in the day is worrying,” said Sapna Agarwal, head of Career Development Services, IIM-Bangalore.

These offers were made as early as December 2015 and students were to join in May, she pointed out.

“For the company to inform the student at the last minute about the change in joining date does not say much about their planning ability,” Agarwal said, predicting an eventual hit to the credibility of the startups that don’t keep their word.

“Students may rank them lower or not apply at all. It depends on how the next few months play out.”

Some such as Rutvik Doshi, a principal at venture capital firm Inventus Capital Partners, think differently.

“This is a needed reality check for students and B-schools. Start-ups are not for everyone, and a management school should know better that start-ups are most vulnerable to business cycles and this is impossible to predict,” he said.

Over the last two years, start-ups have become regulars in top schools such as the IITs and IIMs during placement season. Students, too, seem to prefer the high-energy, high-intensity environment of start-ups.

Mihir Dalal in Bengaluru and Shrutika Verma in New Delhi contributed to this story.