Case

Walmart’s Acquisition of South Asian Journal of

Business and Management Cases
Flipkart: Emerging Paradigm 9(1) 24–39, 2020
© 2019 Birla Institute of Management Technology
of the Digital Era Reprints and permissions:
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DOI: 10.1177/2277977919881404
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P. Bala Bhaskaran1 and Nasheman Bandookwala2

Abstract
The case is set around the acquisition of majority shares of Flipkart by Walmart. The case traces the evo-
lution of Flipkart as a startup and explores the context of acquisition by Walmart as well as the strategic
fit between the two firms. Technological changes—mainly the proliferation of internet, mobile technology
and the consequent digitization—have irretrievable impacts on the retail segment in terms of convergence
of on-line and off-line retail and globalization of the markets. The case explores the emerging digitization
scenario and its impact on the retail segment as a trigger to the merger process. Flipkart as an Indian
startup had to re-incorporate outside India due to policy restrictions on fundraising. The case points to
the inadequacies in the Indian policy regime with respect to startup fundraising and differential voting
rights. Based on international comparisons, the case triggers discussion on the directions to policy changes
if India hopes to create a congenial start-up ecosystem and if the dream of Digital India is to be achieved.

Keywords
Mergers and Acquisitions, strategic-fit for merger, digitisation of retail markets, ecosystem for digital
startups, differential voting rights, management vs control

Prologue
In the second week of May 2018, when the Gangetic plains of India was sweltering under the summer
heat and ubiquitous dust storms, Walmart, the multinational retail giant made a strategic announcement
of acquiring dominant holding in Flipkart, India’s largest e-commerce retailer. In a comprehensive deal
involving the founders of Flipkart (Bansal & Bansal, 2016), investors into Flipkart (Tencent Holdings

Disclaimer: This case is written for classroom discussion and is not intended to illustrate either effective or ineffective handling
of an administrative situation, or to represent successful or unsuccessful managerial decision-making, or endorse the views of the
management. The views and opinions expressed in this case are those of the author(s) and do not necessarily reflect the official
policy or position of South Asian Journal of Business & Management Cases.

1
Swarnim Start-up & Innovation University, Ahmedabad, Gujarat, India.
2
Gujarat Vidyapeeth, Gandhinagar Campus, Gandhinagar district, Gujarat, India.

Corresponding author:
Nasheman Bandookwala, Gujarat Vidyapeeth, Gandhinagar Campus, Gandhinagar district, Gujarat 382421, India.
E-mail: nasheman.bandookwala@gmail.com
Bhaskaran and Bandookwala 25

Limited, Tiger Global Management LLC, and Soft Bank), Walmart announced its intention to acquire 77
per cent of Flipkart at an aggregate sum of US$16 billion. It was billed to be the biggest acquisition in
India’s e-commerce space. Since Flipkart was a pioneer and a torchbearer in its domain in India, this deal
was said to be a trendsetter for a generation of e-commerce entrepreneurs and start-ups. A transaction
worth US$16 billion for a single deal was a lot of money in the Indian context and hence the deal was
touted to be a harbinger of an avalanche of Foreign Direct Investment (FDI) flows into the country.1 How
pragmatic were these expectations?

Flipkart2: Genesis

Early Days
Two young alumni of IIT Delhi—Sachin Bansal and Binny Bansal (not related)—while working at
Amazon conceived of an electronic bookstore and ventured a start-up under the name of Flipkart with
modest facilities of an office in a 2-Bed-room-Hall-Kitchen (2 BHK) residential apartment in Koramangala
in Bangalore with just two computers and an overall investment of `400,000. Initially, they marketed their
website by distributing branded bookmarks in front of Bangalore’s Gangaram Book Bureau. This was in
August 2007.The business was incorporated into a company in October 2008 under the name of Flipkart
Online Services Private Ltd.
Soon the company expanded its product range to include electronic goods, air conditioners, air
coolers, stationery supplies, lifestyle products and e-books. Operations of the company expanded rapidly
with acquisitions in the following years. By 2017, it offered 80 million products across more than
80 categories and had 100 million registered users. By this time, the company offered a variety of
payment modes to suit its customers, such as cash on delivery, credit/debit card payment, net-banking,
e-gift-voucher payments, etc.

Bandwagon of Valuation
In the business of e-commerce, the focus was always more on increasing the number of transactions,
increasing the number of customers handled, increasing the volume of business (turnover), etc. leading
to high valuation3 of the entity. Operational and financial performance tended to receive secondary
priority. The key parameters that helped arrive at the valuation of the entity were (a) number of
transactions handled per day, (b) gross merchandise value, (c) revenue, (d) free cash flow, etc. This
demanded continuous expansion of the business; this meant acquisitions and expansions. Such a strategy
needed continuous inflow of funds. From 2009 onwards, Flipkart kept on acquiring new businesses and
infusing funds.4 Table 1 lists the acquisitions of the company, while Table 2 gives a chronology of the
fund infusion.

Breaking-out of Limitations
Indian policy regime in 2010 did not permit the pace of fundraising that Flipkart envisaged. FDI into the
electronic retail segment was not permissible under policy at that time; to raise capital from the market,
26 South Asian Journal of Business and Management Cases 9(1)

Table 1.  Prominent Acquisitions by Flipkart Group

2010 WeRead A social book-discovery tool

2011 Mime360 Digital content platform company
2011 Chakpak.com Bollywood news site offering news, photos, videos, etc. This site had
rights of 40,000 filmographies, 10,000 movies and 50,000 ratings.
2012 Letsbuy.com Indian e-retailer in electronics US$25 million
2014 Myntra.com Fashion retailer US$330 million
2016 PhonePe A mobile payment service based on Unified Payment Interface (UPI)
from Samir Nigam and Rahul Chari
Source: Compiled by the authors from various sources.

Table 2.  History of Major Fundraising by Flipkart Group

Round Year Source of Capital ` (millions) US$ (millions)

1 2007 Initial Capital from promoters 0.4
2 2009 Accel Partners 1
3 2010 Tiger Global 10
2011 Tiger Global 20
4 2012 MIH (Naspers Group) and ICONIQ Capital 150
5 2013 Tiger Global, Naspers, Accel Partners and ICONIQ Capital 200
2013 Dragoneer Investment Group, Morgan Stanley Wealth 160
Management, Sofina SA,Vulcan Inc, Tiger Global
6 2014 Yuri Milner’s DST Global, Tiger Global, Naspers and ICONIQ 210
Capital
2014 Tiger Global, Accel Partners, Morgan Stanley Investment 1,000
Management and Singapore Sovereign Wealth Fund GIC
2014 Baillie Gifford, Greenoaks Capital, Steadview Capital, T Row 700
Price associates and Qatar Investment Authority
7 2015 Existing Investors 3,000
8 2017 eBay, Micro Soft and Tencent 1,400
2017 Soft Bank Vision Fund 2,500
Source: Compiled by the authors from various sources.

the company needed track record of good financial performance at least for 3 years. Such restrictions
were not experienced in foreign markets. Start-ups in the e-commerce tended to prefer such liberal
markets like Singapore, Ireland, etc. Corporate tax rates were 12.5 per cent in Ireland and 17 per cent in
Singapore vis-à-vis 34 per cent in India. Many of the global leaders like Apple, Adobe, Accenture, Aviva,
Vodafone, etc. are registered in Ireland. Flipkart chose to incorporate a company in Singapore (Flipkart
Private Ltd) and create a complex structure of other companies to continue its operations in India with
Bangalore as headquarters.5 Most of the fund infusion described in Table 2 had happened after this
constitutional structure has come into effect.

Market Leader in India

By 2017, Flipkart held nearly 40 per cent share of India’s e-commerce market, closely followed by
Snapdeal 32 per cent, Amazon 15 per cent, and the rest 13 per cent.6 Electronics and appliances constituted
Bhaskaran and Bandookwala 27

Table 3.  Financial Performance of Flipkart Group

Profit after Tax
Year Sales (` billions) Growth in Revenue (%) (` Billions) Loss as % of Revenue (%)
2013–2014 28.40 140.60 4.00 14.08
2014–2015 95.30 70.10 8.30 8.70
2015–2016 131.70 27.60 5.40 4.10
2016–2017 155.60 15.30 2.40 1.54
2017–2018 216.50 39.10 20.60 9.51
Source: Compiled by authors from various sources. Since Flipkart is registered as a set of private companies, most of them in
Singapore, accessing full annual reports have not been easy.

51 per cent of the market, fashion 30 per cent, books 7 per cent and others 12 per cent (baby-care, food
and grocery, healthcare, personal care, jewelry, furniture and home decor) (refer Note 6). In fact, Flipkart
was leading in the sale of apparels and fashion garments—due to Myntra and Jabong as subsidiaries—
while it was a close second to Snapdeal in the sale of electronics and mobile phones. Overall financial
performance of Flipkart is presented in Table 3.
Flipkart was honoured7 as the ‘Young Turk of the Year’ at CNBC-TV-18’s ‘India Business Leader
Awards 2012’. Sachin Bansal was awarded ‘Entrepreneur of the Year 2012–2013’ by Economic Times,
the leading economic daily newspaper of India. In September 2015, Sachin and Binny Bansal got listing
in ‘Forbes India Rich List’ at 86th position with a net worth of US$1.3 billion each. In April 2016, TIME
magazine listed them in ‘The 100 Most Influential People’.

e-Commerce Market in India

e-Commerce had changed the way businesses were transacted across the world. India was no exception.
Growth in e-commerce was triggered by Internet penetration on the one side and mobile penetration on
the other. In 2017, the Internet penetration in urban India was 64.84 per cent (295 million out of a
population of 444 million), and in rural India, it was 20.26 per cent (186 million out of 906 million),
leading to an aggregate Internet user base of 481 million and Internet penetration of 36 per cent.
Comparable figures for the USA were 84 per cent (266 million users) and for China 48per cent (650
million users). By 2021, India was expected to have 829 million Internet users. The Internet economy of
India was expected to move up from US$125 billion in 2017 to US$250 billion by 2020; the e-commerce
revenue was expected to go up from US$39 billion to US$120 billion in 2020 and US$200 billion in
2026 with CAGR (Cumulative Annual Growth Rate) being more than 50 per cent toward the latter years.
The leading e-commerce players in India were Flipkart, Amazon, Shop Clues, Paytm and Snapdeal.
In 2017, in terms of merchandise handled, electronics and appliances accounted for 51 per cent, fashion
for 30 per cent, books for 7 per cent and others (baby-care, food and grocery, health and personal care,
jewelry, furniture and home decor for 12 per cent. Market share for Flipkart was 44 per cent, Snapdeal
32 per cent, Amazon 15 per cent and others 9 per cent.

Global Market Scenario

Walmart, established in the 1960s, pioneered retail business in the USA and had its strengths in off-line
retail. Amazon, an internet-era company had its strength in on-line retail. Lately, both have been trying
28 South Asian Journal of Business and Management Cases 9(1)

to expand their footprints in both segments. In 2017, Walmart recorded revenues of US$500 billion and
income of US$20 billion. For the same year, Amazon’s figures were US$178 billion and US$3 billion,
respectively. At the end of 2017, Walmart had market capitalization of US$250 billion, while Amazon
was valued at US$680 billion. The higher valuation was attributed to investor perception of Amazon as
a robust company with technology, innovation, high potential for future, etc. In 2017, Amazon had spent
US$23 billion on Research and Development.
Both Walmart and Amazon have been foraying into the emerging markets as they reckoned today’s
emerging markets to be the growth centres of tomorrow. China, despite being the biggest market, did not
conjure pleasant experiences of entry and sustaining business to most Western multinational companies
(MNCs). That left India as the next largest market to be explored. Amazon had established its presence
in India on its own; in 2017, the market share was behind that of Flipkart. Walmart, despite trying hard
for over a decade, had not succeeded. There was the lurking fear that if it did not enter soon, it would lose
the market to Amazon forever.
Walmart had gained experience in converging off-line and on-line businesses to great advantage. In
the USA, it had acquired ‘jet.com’ and provided technology support for its on-line and off-line operations.
In China, Walmart took 5 per cent stake in jd.com in 2016 and tried to support its off-line operations. In
the next 2 years, buoyed by the results, Walmart increased its stake in jd.com to 17 per cent. Walmart was
learning to cross-support on-line and off-line operations.

Business Model and Ownership Structure of Flipkart

Business model of Flipkart consisted of sourcing of goods from manufacturers, selling them to a host of
third-party sellers, who, in turn, offered them to shoppers. Flipkart’s role was in providing the technology
platform and providing the logistics services; for these, Flipkart charged commission on every sale
through the platform.
In the initial stages, Flipkart Online services Pvt Ltd and WS Retail Pvt Ltd—both entities registered
in India—were the two entities through which the businesses were transacted. When the realization came
that to infuse funds into the system and expand the business, it was necessary to operate through entities
registered outside India, a set of interconnected companies were created to manage the business. The
flagship entity was Flipkart Private Ltd, a company registered in Singapore. This company, together with
seven subsidiary companies, managed the entire business. The inter se ownership structure is shown in
Table 4.

Table 4.  Ownership Structure of Flipkart Group

a. List of group companies, year of incorporation and place of registration

Name of Company Short Name Year of Regn. Country of Regn.

 1. Flipkart Private FPL 2011 Singapore The holding company
Limited
 2. Flipkart FMPL 2012 Singapore
Marketplace Pvt
Ltd
 3. Flipkart Digital FDMPL 2010 Singapore
Media Pvt Ltd
 4. Flipkart Payment FPPL 2012 Singapore
Pvt Ltd
(Table 4 continued)
Bhaskaran and Bandookwala 29

(Table 4 continued)

Name of Company Short Name Year of Regn. Country of Regn.

 5. Flipkart Logistics FLPL 2012 Singapore
Pvt Ltd
  6. Flipkart India Pvt F-India-PL 2011 India Cash-n-carry wholesale entity
Ltd
 7. Flipkart Digital FDPL 2011 India
Pvt Ltd
 8. Flipkart Internet FIPL 2012 India Owns Flipkart.com
Pvt Ltd
 9. Flipkart Online FOSPL 2008 India The entire business of the
Services Pvt Ltd company has been sold to
Flipkart India Pvt Ltd. There
is hardly any business left in
FOSPL. Its ownership continues
to be with Sachin Bansal, Binny
Bansal, TigelGloba and Accel
Partners.
10. WS Retail Pvt Ltd WS India This firm is the largest seller
(75) on the platform of flipkart.
com. This entity was owned
by Sachin Bansal and Binny
Bansal till Sep 2012. Since then
its owners are Rajiv Kuchhal
(Onmobile Global Ltd), Tapas
Rudrapatna and Sujeet Kumar.
The last two were employees of
Flipkart till Sep 2012.

b. Inter se shareholding pattern

Percentage Shares Held by
FPL FMPL FDMPL FPPL FLPL F-India-PL FDPL FIPL
FMPL 100.00 — — — — — — —
FDMPL 100.00 — — — — — — —
FPPL 100.00 — — — — — — —
FLPL 100.00 — — — — — — —
F-India-PL 99.90 0.10 — — — — — —
FDPL 00.24 — 99.76 — — — — —
FIPL 00.61 99.39 — — — — — —

c. Share capital, paid up capital and holding structure in 2014 of Flipkart Pvt Ltd
Ordinary shares Preference shares
No. of shares: 16.46 million No. of shares: 71.89 million
Paid up value: US$774,305 Paid up value: US$2.16 billion
Shares held by Shares held by Venture capitalists and PE funds.
Sachin Bansal 45.97% Binny Bansal 45.96%
Tiger Global 7.97% Accel Partners 0.10%
(Table 4 continued)
30 South Asian Journal of Business and Management Cases 9(1)

(Table 4 continued)
FPL was registered as a private limited company. As per rules prevailing in Singapore, the number of shareholders
should be less than 50 for a private limited entity. By 2015, the total number of shareholders in FPL had gone up
to 52. With this, the company had become a deemed public limited company.

d. Shareholding structure of the holding company, Flipkart Private Ltd, post-Myntra acquisition
in 2014.
Main Shareholders
Name % Holding Name % Holding
1 Tiger Global 29.50  8 ICONIQ 3.40
2 Naspers 18.40  9 Sofina 2.40
3 Accel Partners 11.50 10 Morgan Stanley 1.70
4 Binny Bansal 8.70 11 Vulcan 1.40
5 Sachin Bansal 8.70 12 Premji 1.10
Investment
6 Singapore Sovereign Wealth Fund GIC 6.30 13 IDG Ventures 1.00
7 DST Global 4.50 14 Others 1.40
Source: Compiled by the authors from various sources.

The shareholding pattern of the flagship company at the end of 2014 is shown in Table 4d. Majority
(92 per cent) of the ordinary shares of the company were held by the founders, while they did not hold
any preference shares. There were 16.46 million ordinary shares (paid-up value US$0.774 million) and
71.89 million preference shares (paid-up value US$2.16 billion). As a result, the overall percentage
holding of the founders was relatively small (17.4 per cent). Venture Funds, Private equity Investors and
Hedge Funds had significant control over the company. Tiger Global, Naspers and Accel Partners
accounted for almost 60 per cent of the ownership.

What Attracted Walmart to Flipkart?

As an emerging market, India in 2018 was of interest to all major economies and corporates of the world.
In terms of Internet users, India would be comparable to China. GDP growth rate of India—more than
7 per cent per anum—was ahead of most other economies. The growing purchasing power combined
with the Internet penetration was destined to boost the size of the e-commerce market of India.
Flipkart had proven to be the front runner in the e-commerce space over the years with clear-cut lead
and competitive advantage over the next best, Snapdeal. It was the most valued Indian Internet business
commanding peak valuation of more than US$15 billion. Flipkart was the third most funded private
entity having raised US$7 billion from among the best-known sources across the world.
Flipkart had carried out a series of acquisitions in the last decade and had broadened its bandwidth to
handle a wide variety of products across the spectrum. With 8,000 employees and 20,000 contract
workers in India, Flipkart had clearly created the logistics infrastructure required for rapid expansion in
business volumes.
Bhaskaran and Bandookwala 31

Walmart was learning the fine art of balancing between off-line and on-line retail business in China.
This had great relevance to the large Indian market where the two are expected to coexist for quite some
time. Flipkart with its technology platform would benefit immensely with the knowledge of Walmart in
managing the off-line business and the cross-supporting.
Amazon, as part of its customer retention programme, had a membership programme under the brand
name Prime. The number of members under this programme was believed to be in millions. This had
been a concern for Flipkart. By joining hands with Walmart, Flipkart could introduce Sam’s Club
membership programme to compete with Amazon. Though it was built decades back for off-line
transactions, it was transitioning into on-line transactions also. In China, recently, JD.com, Walmart’s
partner, launched an exclusive store for Sam’s Club, and it has been well received by Chinese customers.
Flipkart had availed almost US$7 billion worth of funding from prominent venture capitalists, private
equity investors and hedge funds. These investors have their focus on their returns and were looking for
exit opportunities. Exit opportunities could come only when a strategic investor took a major stake in the
entity.

Background of Walmart8
Walmart Inc (earlier known as Walmart Stores Inc), an American multinational retail corporation
operated a chain of hypermarkets, discount stores and grocery stores. Founded by Sam Walton in
Bentonville, Arkansas, in 1962 and incorporated in 1969, it managed 11,718 stores and clubs in 28
countries under different names as on January 2018. With global revenue of US$500 billion in 2017,
Walmart was reckoned as the world’s largest company. Globally, it employed 2.3 million persons; this
made Walmart the largest private employer. It is family controlled but publicly owned company. Sam
Walton’s heirs own more than 50 per cent of the company’s shares through a holding company, ‘Walton
Enterprises’ and through individual holdings. The stocks of the company are traded at New York Stock
Exchange since 1972. During 2018, Gregory Penner was Chairman and Carl Douglas McMillon was
President and CEO.

The Process of Acquisition9

Walmart after negotiations with investors in Flipkart as also with the founders of Flipkart announced, in
May 2018, its intention to acquire 77 per cent shares of the company subject to regulatory approvals.
Walmart had completed fair amount of due diligence in this direction. It would need formal clearances
from Accounting and Corporate Regulatory Authority (ACRA) and Singapore Stock Exchange since
Flipkart was registered as a company at Singapore and its stocks were listed therein. In all probability,
Walmart might be asked to make an open offer to the shareholders; most stock exchanges had the practice
of insisting on an open offer when an investor acquired significant percentage of shares of the target
company (in most stock exchanges, the threshold limit was 20 per cent). This provision was to protect
the interests of the minority shareholders. Walmart would need clearance from Securities Exchange
Commission, USA, also.
Walmart has already approached Competition Commission of India (CCI) for formal clearance of
the acquisition. (Confederation of All India Traders (CAIT), a body with a million members across the
country claimed that the proposed deal would lead to unfair trade practices in the offline retail segment
32 South Asian Journal of Business and Management Cases 9(1)

and would adversely affect the interests of the innumerable number of small traders.10 CAIT had
represented to the CCI, as also the Commerce Minister, Government of India (GOI), not to endorse the
acquisition. All India Online Vendors Association (AIOVA) another trade body representing 3,500
on-line traders have also joined hands with CAIT in opposing the Walmart–Flipkart tie-up. Both bodies
represented small to mid-size traders spread across the country and were capable of mobilizing political
support to their claims.
Flipkart, over the years, had attracted investigations by Enforcement Directorate, RBI, etc. for
violations of the Foreign Exchange Management Act. Perceived violations of regulations, the
animosity of trade associations, impending national elections and the ambiguity in policy framework
had the potential to cascade into a major hurdle for the roll-out of the acquisition. But could CCI or
any authority in India, hold up the transfer of shares of a company incorporated in Singapore, whatever
may be the reasons? Authorities in India could, at the most, delay permissions, if any, for operations
in India.

Flipkart and Vision of Digital India

Digital India, a programme initiated by the GOI in 2014, ‘envisioned transforming the nation and creating
opportunities for all citizens by harnessing digital technologies. The vision was to empower every citizen
with access to digital services, knowledge and information’. GOI had announced a draft policy in May
2018 and asked for suggestions from public.11 ‘Propel India’, one of the initiatives under the policy, was
concerned about technology development, mobilizing resources, development of start-ups, entrepreneurial
development, etc. Did the Flipkart experience throw any light in this direction?

Creating an Ecosystem for Digital Startups

In the early stages, Flipkart had to go to Singapore and create a complex ownership structure to attract
venture funds, due to policy restrictions in India. If India failed to change this situation, there were large
number of start-ups ready to emulate Flipkart and the route it had followed. Raghav Bahl in a paper had
echoed this sentiment and had pleaded for creation of an ecosystem conducive for nurturing technology
entrepreneurs and professionals. (Bahl, 2018; Chakrabarti, 2018) Can the policy framework be amended
to avoid such situations? Could there be a separate set of regulations for the digital companies?

Valuation
Digital companies tended to measure success in terms of valuation which was determined by the eyeballs
the company attracted on its webspace, which in turn was dependent on the number and volumes of
business transactions per day. In pursuit of these parameters, digital companies tended to give lower
priority to their physical and financial performance. The existing regulations of fundraising and listing-
guidelines of stock-exchanges in India were not aligned to such strategies of the digital companies
though current thinking on this aspect had undergone a sea-change. Should digital companies focus only
on valuation or should there be a trade-off between valuation and long-term sustainability? Should this
concern be built into the regulations? How?
Bhaskaran and Bandookwala 33

Foreign Direct Investment Flow into India

The founders of Flipkart held less than 17 per cent of the company. Since the company was registered
at Singapore and since most of the shareholders were not residents of India, only insignificant part of the
US$16 billion would have trickled into India. So, there was no question of any major FDI inflow into
India. So long as there were advantages of registering the start-up outside India, the FDI flow arising
through similar ventures and deals were unlikely to be significant.

Ownership Versus Control

In the developed economies, the regulatory mechanism had provisions for differential voting shares,
non-voting shares, variable interest entities, etc. that enabled founders to have voting rights dispro­
portionate to their shareholdings. This practice enabled clear-cut demarcation between ownership rights
(implying economic rewards from the company) and controlling rights (implying directing the destiny
of the entity). Founders of Google (Larry Page and Sergey Brin) owned only 14 per cent of the company,
but they controlled 56 per cent of voting rights of the company. In the case of Alibaba, Jack Ma held only
8 per cent of the company, while controlling almost 100 per cent of voting rights. A similar situation
existed in Tencent also. In the case of Amazon and Facebook, the founders held 16 per cent and 24 per
cent, respectively. The exact status of voting power of the founders could not be ascertained. In all
probability, they were also engaging the same method to control the entities.12 Such financial innovations
were not permissible in India in 2018. On the contrary, India witnessed a situation in 2017, where the
merger proposal between Snapdeal and Flipkart was initiated by SoftBank, a prominent investor in both
entities (For some reason or other, the merger did not materialize.). When founders were not in a
controlling position, external investors, like Soft Bank, tended to dictate the direction of the entity.13
Table 5 shows the status of the leading Internet/e-commerce companies—of Indian origin and global.
The foreign start-ups—especially American and Chinese—were able to grow larger without the founders
losing control over the entity. In fact, these firms were larger than most economies of the world.14 On the
contrary, by the time any Indian start-up crossed infancy stage in its life cycle to commence growth, its

Table 5.  Ownership Pattern of Prominent Internet Companies

a. Companies founded by Indian founders

Name of Founders Name of Foreign Market cap

Company Year Started Name % Holding Investors (US$B)
Flipkart 2007 Sachin Bansal and 17.00 Softbank and others 21.00
Binny Bansal
Snapdeal 2010 Kunal Behl and 8.50 Softbank (32%) and 1.76
Rohit Bansal others
Paytm 2010 Vijay Shekar Sharma 21.33 Alibaba (45%), 6.00
Softbank and others
Make-my-Trip 2000 Deep Kalra 25.00 Tencent and others ..
Ola 2010 Bhavesh Agarwal and 40.00 approx. Softbank and others 3.00
Ankit Bhati
Zomato 2008 Deepinder Goyal 31.00 Alibaba and others ..
and Pankaj Chaddah
(Table 5 continued)
34 South Asian Journal of Business and Management Cases 9(1)

(Table 5 continued)
b. Global companies
Founders Market Cap US$
Name Year Started Name % Holding % Voting Power Billion
Walmart 1962 Sam Walton 51% More than 50% 250
‘Walton Enterprises’
Amazon 1994 Jeff Bezos 16% Data not available 680
Google 1998 Larry Page and Sergey 14% 56% 581
Brin
Facebook 2004 Mark Zuckerberg 24% Data not available 412
Alibaba 1999 Jack Ma 8% Almost 100% 542
Tencent 1998 Ma Huateng (Pony M)] 10% approx. Almost 100% 580
Source: Compiled by the authors from various sources.

founders would have lost control over the entity. Did it auger well for the entity, its founders and for the
Indian economy? Would it be unfair if Raghav Bahl described this phenomenon as ‘digital colonization
by global biggies from USA and China?’15

Epilogue
With the acquisition of Flipkart, the Indian retail market segment would definitely look different. It
would be aligned with the global market in terms of products, practices and competition. The main battle
would be between Walmart and Amazon just as in any other mature market. Convergence of off-line and
on-line retailing could also be the order of the day with physical store network supporting the logistics
of on-line transactions and vice versa. The business volumes under retail would undergo a quantum leap,
and the consumer experience in India would surge forward to new levels.
What would happen to the large number of off-line traders and on-line vendors present in India? They
would need to upgrade their technology and business processes to survive. They would find it hard
competing with the international giants who would have humongous advantages through their supply
chains, logistics and sheer size of operations. Many of them would align into retail chains and corporate
entities.
What would happen to the large number of start-ups? Start-ups would continue to emerge as long as
the spirit of innovation is alive and the ecosystem is conducive. For continued growth of the start-ups,
they would need supports of funding and technology. If the ecosystem inhibits providing these supports,
the start-ups would migrate to other ecosystems where such supports are easily available, in the same
manner as Flipkart did. When the inhibitors are significant, would the founders sell off the start-ups early
to pocket the money or would they go through the struggles to make them big?
What about the dream of digital India? India and Indians will definitely be digitized, but would they
be in a position to play a significant role in the digital space? General Electric has been moved out of
Dow Jones Index effective 26 June 2018, after being part of the index since inception of the index in
1896.16 The five most valued companies in the USA in 2018 were Alphabet (Google), Amazon, Apple,
Facebook and Microsoft. All of them are technology companies with three prominently in the digital
space. If this is an indication of the shape of things to come, can India afford to ignore the need for
prominence in the digital space? India does not lack in talent and entrepreneurship; policy regime seems
to be the deficient area waiting for a rejig. This is the challenge for India and its people.
Bhaskaran and Bandookwala 35

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of
this article.

Funding
The authors received no financial support for the research, authorship and/or publication of this article.

Notes
  1. The initial news and the details of acquisition are sourced from Economic Times (2018a, b, c), Abrar (2018) and
Goel (2018).
  2. Information on the history and evolution of Flipkart are based on Flipkart Success Story (2018), Wikipedia on
Flipkart (2018), Chaudhury (2012), Two IITians create History (2018), Singh (2017) and Team Flipkart Stories
(2017).
  3. Change in the thinking on valuation of digital companies have received lot of attention from academicians and
practitioners alike (Govindarajan, Rajagopalan, & Srivastava, 2018; Finding a better way to value companies in
the digital world, 2016).
  4. Growth of Flipkart through acquisitions and fund infusion are based on Dalal (2013a, b), Moneycontrol.com
(2013), Abudheen (2013), Vikas (2013), Agarwal (2014), Kurup (2014), Thoppil (2015), Pitch book august
roundup (2018), Russel (2017), Goptu and Variyar (2017) and Your Story (2017).
  5. Many Indian start-ups have been going outside India to incorporate companies to facilitate easier fund access
and faster growth. Lower tax-rate is said to be one of the reasons; this can be discounted since in the early stage
of growth of the entity the tax incidence is bound to be small (Why Flipkart registered in Singapore? 2015;
Sundaresha Subramanian, 2015; Verma & Dalal, 2014).
  6. Data on domestic market-shares of the e-commerce companies and the drivers of e-commerce have been gath-
ered from Website of India Brand Equity Foundation (2018), Evolution of E-commerce in India (2014) and
Business Standard (2015).
  7. Awards and recognition to Flipkart are based on Bansal and Bansal (2016), First Post (2015), CNBC-TV18
(2012) and Economic Times (2013).
  8. Primary information on Walmart is sourced from Wikipedia on Walmart (2018) and Khatri (2018).
  9. Information on the Walmart-Flipkart deal and its impacts are sourced from Economic Times (2018d, e), Das
(2018), Palit and Chaudhury (2018), Nair (2018), Raghunath (2018), Mookerjee (2018), Zeenews.India.com
(2018) and Peer Mohammed (2018).
10. Roadblocks in the process of acquisition (Business Today, 2018a, b; Thomas & Tyagi, 2018; Choudhury &
Mookerji, 2018; India Today, 2018; Economic Times, 2018f).
11. The draft of the National Digital Communication Policy (2018).
12. The super-voting rights (2018). The voting power of Jack Ma in Alibaba and that of Pony Ma in Tencent
Holdings are mentioned in the paper of Raghav Bahl.
13. The merger proposal between Snapdeal and Flipkart did not get through in 2017. With founders of both com-
panies holding insignificant percent of shares, it was difficult to rally the concurrence of all the shareholders to
the proposal. SoftBank was a common shareholder and was perhaps trying to orchestrate the deal. Moral of the
story is that founders should have significant control or else the probability of someone else hijacking the entity
is high (Goptu, 2017; Goyal 2017).
14. In fact, only 24 economies out of 191 had a nominal GDP of more than US$ 500 billion. So the e-commerce
majors [with market-cap more than US$ 500 billion] were larger than most of the economies of the world. Based
on IMF data. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) Retrieved on 20 July 2018.
15. Please refer to Raghav Bahl’s article which has been referenced in Note 12 above.
16. General Electric was part of the Dow Jones Industrial Average right from the day the index was created.
Performance of GE stock was going down for the last decade despite the euphoric days of Jack Welch. Finally,
36 South Asian Journal of Business and Management Cases 9(1)

the authorities decided to let GE go out of the index and it was replaced by Walgreens Boots Alliance, a drug-
store chain. The top-5 companies on the US bourse in terms of market-cap, on 25th July 2018, were Apple
[US$955 billion], Amazon [US$898 billion], Alphabet/Google [US$879 billion], Microsoft [US$848 billion]
and Facebook [US$579 billion]. Each of them was striving to reach the trillion-dollar-mark in terms of market
capitalization whereas India, the 4th largest economy in 2018, had GDP of only US$2.6 trillion. This signified
the emerging power of the digital business. If India aspired for a share of the digital business it would need to
nurture start-ups in the digital space far more pro-actively (Phillips, 2018).

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