The behind-the-scenes story of Sachin Bansal’s exit from Flipkart
Walmart was initially keen on retaining Sachin Bansal, but reversed its stand after the Flipkart board, led by Tiger Global Management’s Lee Fixel decided to cut him out
Bengaluru/New Delhi: Sachin Bansal’s fate at Flipkart was sealed in Bentonville, Arkansas, in late April. Sachin Bansal, co-founder and then chairman of Flipkart, along with Lee Fixel and other representatives of the company were hunkered down in Arkansas, home of retail giant Walmart Inc. They were in the last stage of negotiations to sell a majority stake in Flipkart Pvt. Ltd to Walmart.
Till that stage, Bansal and Fixel, partner at Flipkart shareholder Tiger Global Management, had together driven the discussions with Walmart. But suddenly, they found themselves on opposite sides.
Bansal, who had been pushed out of the CEO role by Fixel and the other board members in January 2016, wanted a bigger, operating role at Flipkart, people familiar with the matter said.
Bansal thought he was justified in asking for it: he had planned to buy Flipkart’s shares worth $450 million to increase his 5.5-6% stake in the e-commerce site with the Walmart deal, the people cited above said.
Bansal was considering ways in which he could take a loan to buy those shares, the people said.
According to the structure that was envisioned until late April, Walmart was to get a majority stake of at least 55% in Flipkart, with the rest being held by some existing minority shareholders. They were to be joined by new investors.
The deal structure was designed with the intention of ensuring that Flipkart doesn’t become a unit of Walmart and that the company could go for an initial public offering (IPO) at some point.
The Flipkart-Walmart deal was supposed to be Sachin Bansal’s shot at redemption. He had lost control of Flipkart after his planned transformation of the company backfired in 2015. Fixel and other investors of Flipkart later removed its co-founders, Sachin Bansal and Binny Bansal, from operational roles and installed Kalyan Krishnamurthy, a former executive at Tiger Global who is close to Fixel, as CEO last year.
With Walmart’s entry, Sachin Bansal thought he could salvage his reputation and take back control of Flipkart, people briefed on the deal said.
Sachin Bansal and Walmart executives had held discussions with Google CEO Sundar Pichai, who told them Google was open to investing up to $2 billion in Flipkart, the people said. At the same time, Sachin Bansal was trying to persuade Flipkart’s largest shareholder, SoftBank Group Corp., to retain its 20%+ holding in the firm.
Tencent Holdings had indicated it would stay invested and Microsoft Corp. was considering increasing its stake in Flipkart.
Sachin Bansal and SoftBank had even solicited rival buyout offers from Amazon, but the rest of the Flipkart board was in favour of a deal with Walmart.
By late April, Amazon was out of the picture, as talks were progressing with Walmart.
Then came the matter of Sachin Bansal’s shareholder rights and role after the Flipkart-Walmart deal.
At least three Flipkart board members—Fixel, Accel Partners’ Subrata Mitra and Naspers’ Bob Van Dijk—were opposed to giving Sachin Bansal a strong operational role. They backed Krishnamurthy, who was continuing as CEO and wanted autonomy in running the company. But Sachin Bansal insisted on a bigger, operating role, especially as he was set to increase his stake in Flipkart. He also wanted strong shareholder rights for himself and minority shareholders. These rights would give Sachin Bansal and minority shareholders a significant say in matters of strategy, management appointments and related-party transactions, among other matters.
The Flipkart board believed Sachin Bansal was implicitly angling for the role of group CEO, as Binny Bansal, who was then holding the post, had indicated that he didn’t want to be involved operationally at the company, at least not immediately.
Fixel and the other two board members believed that Bansal had driven the company to the brink of collapse in 2015 and they didn’t want him to have a strong say in operations, especially as that would upset Krishnamurthy, who had turned around Flipkart. They believed Krishnamurthy had earned his right to run Flipkart without interference from Bansal.
Neither side compromised. At one point, Sachin Bansal even said he wouldn’t sign off on the deal unless the board agreed to his demands. Fixel had once been close to Sachin Bansal and until 2015, his biggest backer, but he now believed that Krishnamurthy had earned his right to run Flipkart without interference from Bansal.
On 25 April, after four days of discussions in Bentonville, the Flipkart board sided with Fixel. Sachin Bansal was cut out. He would sell his entire stake for more than $1 billion and leave the company. What is curious is that despite the fact that Fixel, Accel and Naspers had planned to sell all or most of their stakes, they had considerable influence over Sachin Bansal’s role after the deal. That’s because Walmart was leaning on Fixel and the Flipkart board for guidance on management-related matters, two of the people cited above said.
Walmart was initially keen on retaining Sachin Bansal, especially as he had built a rapport with Walmart CEO Doug McMillon. But after the Flipkart board decided to cut out Sachin Bansal, the American retailer trusted them and reversed its position on him, the two people said.
Still, Walmart wanted at least one of the Flipkart founders to stay with the company after the deal. The Flipkart board reached out to Binny Bansal on 25 April and asked him to take on the additional responsibility of chairman. Binny Bansal, who had been a marginal figure in the deal until then, accepted.
Walmart announced on 9 May that it would pay $16 billion to buy 77% in Flipkart. Walmart and Flipkart didn’t mention Sachin Bansal even once in the press release announcing the deal, which had been tweaked from the initial structure that was envisioned just three weeks ago.
The same day, Sachin Bansal posted on Facebook: “Sadly my work here is done and after 10 years, it’s time to hand over the baton and move on from Flipkart. But I’ll be watching and cheering from the outside—Flipsters, you better continue to do a good job!”
Sachin Bansal didn’t respond to messages seeking comment. Flipkart CEO Binny Bansal didn’t address any questions raised in this story and said he was bound by confidentiality terms. Referring to the details in the story, he said “please refrain from airing conjecture and innuendo”. Tiger Global didn’t respond to an email seeking comment. Walmart declined to comment.
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