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Flipkart founder's exit heralds management exodus under Walmart

US retailer's struggles in India push it to take greater control

Flipkart CEO Kalyan Krishnamurthy is well-suited to lead the company, said one analyst.    © Reuters

MUMBAI -- The unceremonious exit this week of Binny Bansal from Flipkart, the e-commerce unicorn he co-founded, may well signal the start of an exodus of senior and middle-level executives, under the company's new owners Walmart, industry watchers and experts say.

Binny, who started Flipkart in 2007 with Sachin Bansal (no relation), stepped down as CEO on Tuesday following an investigation into alleged "serious personal misconduct." Binny denies any wrong-doing.

Tuesday's announcement came as a shock to many in the industry. In the last decade Binny and his partner built the company from an online bookstore into one of the country's biggest e-commerce platforms. He became group CEO after Walmart, the U.S. discount chain, bought 77% of Flipkart for $16 billion in May.

Some had predicted that Binny might eventually leave despite his promotion, as he was not actively involved in the day-to-day operations of group companies Flipkart, Myntra, Jabong, and PhonePe. But not quite so soon. Now, his departure is expected to have repercussions, perhaps within days, according to industry insiders.

Satish Meena, senior forecast analyst at Forrester Research, said he had not been expecting management changes until next year. Changes at operational level as well the board were now likely to be accelerated, he said.

Local media has been speculating about management changes since the Walmart-Flipkart deal was completed in August. In September, The Economic Times reported that Walmart had appointed a new chief financial officer, a general counsel, chief ethics and compliance officer and group controller.

"Obviously, when there is change of management some of the old leaders may not like the new team, and they may not be comfortable with things and some exits are bound to happen," said Grant Thornton India Partner Harish HV.

The Flipkart board has eight directors, of whom five are Walmart-appointed, one represents investment company Tiger Global and one is from Tencent Holdings, a company founder.

Tokyo-based SoftBank Group, the largest shareholder in Flipkart before the takeover, received $4.5 billion for the entire 20.8% stake it held, while Sachin Bansal sold his 5% stake in the company.

Meena said Walmart will now focus on tightening operations to improve profit margins, using its experience in the offline retail space.

"They [Walmart] will focus more on increasing category-to-category profits at the same time reducing expenditure, which will hamper the scale of growth [Flipkart] wanted to take," he said. Previously, "the company was trying to grow aggressively because they were in the valuation game."

Since Walmart is a listed company, the scrutiny and disclosures around Flipkart would ensure that it was more transparently run, he added.

The changes might cause "mini-hiccups," said N. Chandramouli, CEO of brand consultancy, TRA Research. But the elevation of Kalyan Krishnamurthy as Flipkart Group CEO would ensure their continuity in operations. Krishnamurthy, who joined Flipkart in 2013 from Tiger Global as sales chief and finance head, was well-suited to lead the organization, Chandramouli said.

Walmart entered India in 2007 by setting up a joint venture with major domestic telecom company Bharti Group to operate the cash-and-carry chain Best Price, which later became a wholly owned subsidiary. But Walmart has never succeeded in making Best Price a household name.

It has been struggling to expand in India because of strict rules on foreign direct investments in multibrand retail. The Flipkart deal meant a seamless entry into the online space and allows Walmart to use the e-commerce group's platform to expand.

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