From the front pages of business dailies to Twitter to the denizens of India’s Silicon Valley—if there was one company that became the toast of the town most of this week, it was Flipkart. While the e-commerce major never really ceases to be out of the news, several developments over the past three-four days yet again highlighted why Flipkart matters so much.
To begin with, the Competition Commission of India (CCI) approved Flipkart’s acquisition by U.S. retail giant Walmart, paving the way for one of the largest M&A transactions in the country involving an Indian firm. The deal will enhance the government’s coffers by `13,000 crore—in the form of taxes. But most significantly, the company is giving a neat 60% return on its investment to SoftBank, in less than a year. While this led to 49.2% jump in SoftBank’s first-quarter operating profit, the returns are extremely crucial for the Indian investment ecosystem as questions have been asked about the viability of investing in such new-age firms where losses don’t seem to end.
But let’s pause a bit. Why is there so much focus on Flipkart? History may give us a sense, a few industry insiders pointed out. In the early 1980s, when Infosys started, it was crucial for the company to prove the outsourcing model right for the rest of the industry to follow it. To be sure, most IT companies in India had a strong outsourcing element to them in their earlier days.
The second-largest Indian IT company by revenue, this Bengaluru-headquartered firm was the bellwether of India’s IT industry till about a few years ago. As Infosys grew, so did the industry’s importance. The contribution of the IT services and business process outsourcing (BPO) industry’s contribution to India’s GDP rose from 1.2% in 1998 to 7.7% in 2017. Similarly, when it comes to Flipkart, which pretty much established and substantiated the model of horizontal e-commerce play in India, its success could give confidence to other entrepreneurs that disrupting a business model and creating a market is a possibility.
On its part, Flipkart has so far managed to give arch rival Amazon stiff competition despite its deep pockets; in the process, it caught the attention of the world’s biggest retailer, who set out to woo it for a presence in India.
And for young Indian entrepreneurs in need for role models, who better than these two young, middle-class engineers? After all, the duo started what is today a $20 billion company from a two-bedroom house, packing books by themselves.
“People a generation before me grew up idolising Jobs (Steve Jobs, the Apple co-founder who passed away in 2011). I look up to Sachin Bansal and Binny Bansal (the Flipkart founders). They are relatable…. so like us,” a young, budding entrepreneur tells me.
As with most successes, the duo’s accomplishment may have a ripple effect. They already seem set to help other entrepreneurs. For example, Sachin, Flipkart’s co-founder and former chief executive, is said to be considering raising a $700 million to $1 billion for a fund that would invest in startups, Mint reported earlier this month, citing unnamed sources. Fortune India could not independently verify this. Both Sachin and Binny have already backed several startups, including edtech platform Unacademy, electric vehicle firm Ather Energy, and news app Inshorts, among others.
As they say, you may love it or hate it, but you cannot ignore it. Flipkart seems to be fitting that bill rather perfectly.
