Lessons from the Walmart-Flipkart Deal

Walmart's acquisition of Flipkart for $16 billion is the most exciting news for a variety of reasons and means a world for Indian Retail Industry. It is exciting because for a team of co-founders who braved the odds of running an E-Tail startup against all rejections, criticism and hardships for 11 years, this deal is the proof of concept that startups in India can not only succeed or become a unicorn (having valuation above $ 1 Billion) but get scaled upto a level that attracts the attention of the world's best investment bankers and giants like Walmart, Amazon (in the way its been pumping before and after the deal was announced) and Alibaba (who is also eyeing the Indian E-tail space). The deal happened to a company that is yet to enter "teens" but it will fire up the imagination and enthusiasm of millions of young people in India and South Asia to dream big in startups. The deal is also going to make bankers sit up and take notice as many of them are still unable to determine using conventional templates how to value and finance a company having negative EBITDA or higher cash burn rates. There has to be a way for project-financing bankers to participate in growth opportunities without collaterals. On the day of the deal announcement, Flipkart had accumulated losses over Rs.24000 crore (almost $ 4 Billion) but the ones who will make money from this deal will be Softbank (if they exit), Tiger Global, Accel Partners, Tencent Holdings and others who took risks. The deal is going to sizzle up the Investment Landscape too - with Alternative Asset-Class becoming worthy of Investment-grade by UHNWIs and HNWIs. OF course, not every deal will be a runaway success but we are at an inflection point today just as we were when we only had Templeton, UTI and Canbank and Indbank peddling Mutual Fund Schemes. The deal is also going to make all those Billionaires in India wake up to threats of their brick-and-mortar businesses without focusing on areas of impact - Artificial Intelligence-based Algorithms, Supply Chain connectivity, Top-notch managerial talent and Financial Innovation. And finally, the deal is just a scratch on the surface of the $750 Billion Retail Merchandise industry. Walmart is known to upend most of the Retailing oligopolies wherever they set foot and their move here will sure trigger agitations and backlash from existing stakeholders in India's vast Retail order but it is one of the tipping points for a host of reasons as above. There have been enough poison-pill reports by startup commentators in the last few years about whether India is going overboard with obsession over unicorn valuations and startup movements. This deal is an answer to all that fuss over valuations. The next time someone kicks their job to start up a company (even if it is not IT-related) or gets a campus offer from a startup or raising funds via crowdsourcing, respect them and wish them well - there is honor and promise in such risk-taking. Lastly, welcome to the benefits of Flexible thinking. We live in an era where a Tech-averse Warren Buffett has mended ways to invest in potential $ 1 Trillion tech companies like Apple. Follow the cheese, wake up and smell coffee! Congrats Bansals. #FlipkartDeal #WalmartFlipkart

PM Manmohan Singh speaks on Doordarshan: Need for Economic Literacy

Keeping aside the follies of Congress-I and the pros and cons of bringing in FDI in retail, happy to see the s(p)inister Mamatha get beaten at her bluff. With 19 seats, You cannot dictate terms to a coalition partner of 205 seats. And for God's sake, when will the politicians get a tutorial in Economics? Doing a Bharat bandh and making the economy halt for a day makes life tougher for the common man. Some part of the output of the day Rs.12500 crs. plus is gone out of the mouths of poor people - daily laborers, shift workers, etc. BJP should understand that being asinine and idiotic in approach wont get them the votes in the next election.


While I am neutral to both the parties, can BJP give a declaration in writing that they will not raise fuel prices if they come to power? Can Mamatha have a bet with CPI that she will never take harsh measures against the common man? In Economic realities, you can never do it. BJP should realise that the toughest decisions in Economic policy were taken by Congress-I - they raised fertilizer prices more than 350 per cent, they raised fuel prices several times (out of compulsion not out of sadism because the crude oil prices never spiralled out of control during BJP regimes), FDI in other sectors.

BJP and the opposition in those times never did a roadshow against the raising of fertilizer prices. (Fertilizers is one of the key goods imported by India - apart from Crude oil, Coal, Gold etc.). So, the opposition is usually selective about the protests they want to do rather than fully understand the ramifications of any decision. India has become a democracy before its people became literate, as Nandan Nilekani said, which is not the case with other democracies in the world. So, neither the people nor their chosen representatives have found the time and maturity to ripen their knowledge of what drives decisions in the world - directionally and structurally. It is the responsibility of everybody involved to discuss threadbare the consequences of policy decisions.

If the ruling party hasn't done it, it is the responsibility of the media, the elite, the educated, the opinion-leaders, the state governments, the legislators, the opposition party members - everyone, has a stake in understanding and explaining how future is impacted - if we don't allow Fresh Foreign Capital, technology, management and resource inputs of other kind into Retail or any other sector where efforts to keep it indigenous have either failed or created issues of scale and profitability.

Agents who sold post-office deposits are selling mutual funds, actuaries (and everybody down the value-chain of technical qualifications) who used to be employed by LIC are today gainfully employed in private insurance companies, entrepreneurs who are happy to be small shop-keepers are going to find alternative ways of scale-up or be pushed out.

Change is inevitable and the last 10 years of window the retail has got has only seen few flourish but many stick with old ways of handling money. There are more issues at play here but the payoffs are going to be better than worse.

Tonight, when Manmohan Singh addresses the nation at 8pm, I hope we will all see the need for a healthy debate on policy reforms instead of stalling parliaments and disrupting economic activities. If you like this post, share it with as many. If you don't like this, lets talk more and discuss why. Let us develop more economic literacy.

Post-Script: Since this was posted, Prime Minister spoke on National Television. His speech was measured, informative, persuasive and hard-hitting: "Money does not grow on trees", "They did not succeed in 1991 and they will not succeed now." Here's the link to his full speech.

http://www.moneycontrol.com/news/economy/pms-address-tonationfull-text_760537.html?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+moneycontrol%2FiOjZ+%28Moneycontrol+Updates%29