Thursday 7 February 2019

Concerned about constant e-policy changes by govt, says Binny Bansal

Flipkart co-founder Binny Bansal has expressed concern about the constant policy changes by the government and its impact on the online retail industry and the startup ecosystem. Bansal, who left as Flipkart CEO in November but continues to be on the board and holds a 4% stake, said that he does not have an issue with the latest policy per se, but the constant changes that companies need to adapt to. “The problem is not with the policy, but it keeps changing….if the goalpost keeps changing, rather than customers and business, entrepreneurs will need to keep focusing on compliance,” he said, adding that to encourage entrepreneurship, we need a policy which is consistent over 15-20 years.

Bansal’s comments come after the department for promotion of industry and internal trade (DPIIT) updated the foreign direct investment (FDI) policy for the online retail industry in late December, which caught the industry by surprise. It went into effect on February 1 and was an amendment to the policy on online marketplaces first released in March 2016. 

The new policy puts a series of curbs on how both Flipkart and its rival Amazon India operate — restricting discounts, no ownership in sellers on the marketplace platform and disallowing exclusive product launches — forcing them to restructure operations and take a hit on sales. 

The change in policy also came months after US retail giant Walmart spent $16 billion last year to buy a 77% stake in Flipkart, one of the largest M&A transactions in India and a landmark event for the country’s startup ecosystem.

But the change in policy is expected to impact Walmart’s bottom line, according to analysts. Morgan Stanley also said that if Flipkart is forced to remove 25% of products, it may cause a 40% slowdown in revenues. Adding compliance costs, it will lead to an incremental $280 million in Flipkart losses on top of a guidance of about $1.5 billion for 2019. Morgan Stanley also said that Walmart will exit India because of the current change in policy: “An exit is likely not completely out of the question with the India e-commerce market becoming more complicated.”

While Bansal did not comment on Walmart’s exit, he said that it does not set a good precedent for startups. “This is not good for entrepreneurship and (startup) ecosystem at all……I am very concerned about what happens to innovation infrastructure. E-commerce is still very small in India,” he told TOI, taking the example of China where new social e-commerce startup Pinduoduo has been able to emerge as a competitor to large existing players like Alibaba. In November, Bansal left Flipkart, which he co-founded with IIT-Delhi graduate Sachin Bansal in 2007, after a failure to disclose allegations of “personal misconduct”. The allegations were “uncorroborated after a thorough investigation completed by an independent law firm” and Bansal had said at that time they left him “stunned”.

Bansal said that he plans to focus on supporting entrepreneurs now through investments, and recently launched software and consulting venture xto10x Technologies. Bansal is taking on the role of chairman in xto10x, which has been started by former Flipkart executive and McKinsey consultant Saikiran Krishnamurthy. 

Besides, Bansal has also anchored early stage venture capital firm 021 Capital, which was launched by his wealth manager Sailesh Tulshan. He is also an angel investor in over a dozen startups, including some of his latest bets like digital insurance player Acko and Niramai, which is developing a non-invasive way to detect breast cancer.

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