E-Commerce

Flipkart to incur losses in FY19; FDI policy to be blamed

Flipkart's revenue grows by 50%

Flipkart is India’s biggest e-commerce company. It is one of those companies which has tackled every foreign company that came in India and maintained its rank regardless. The company was founded by two former Amazon employees and taken it forward to one of the biggest in India. Sachin and Binny Bansal are no longer at Flipkart. The company is also not Indian anymore even after its Indian roots, the company is owned and controlled by Walmart. The American giant splashed $16 billion to buy the company and this made Sachin and Binny Bansal almost billionaires.

That said, the company had been performing extremely well in the e-commerce sector and that was one of the reasons it was bought by Walmart. However, the moment it was bought, there were some major changes at the helm. Sachin Bansal and Binny Bansal left almost immediately after they lost control of the company. There were new faces in old positions and old faces in new positions. This made the company go through a major transition phase. During this phase, the company’s operations were hampered and there were a lot of hurdles along the line.

In this entire chaotic atmosphere at Flipkart, the government announced the new FDI policy which kind of was the nail in the coffin for the Walmart-owned company. However, the strong base of the company and an established user base made it survive the storm which is still here and stirring things the wrong way. The revenue of the company was never hit but the losses went head over heels. This made the company predict losses for the upcoming year as well. The Financial Year 2018 was a sweet bitter year for the company. The company saw a huge surge in the revenue and the numbers are presentable on that front.

The company oversaw a 50% surge in the revenue since Walmart took over in August of 2018. Paper.vc made the revelation that Flipkart’s revenue hit INR 30,164 crore in the FY18. The company’s losses, however, tell a different story. The losses increased five times from FY17 and have reached a staggering number of INR 46,895 Cr. The majority of losses came in the financial sector of the company. The number increased ten times from the previous financial year. It reached INR 40,937 cr from INR 4,309 Cr.

The company predicts to incur losses in the upcoming Financial Year as well. Walmart has been hit hard as soon as it entered India. It has two very bad experiences in India and this one is also turning out to be the same. The company is being patient, however, the newest FDI policy is turning out to be sucking a lot of money and giving out returns which are penny-like.

It is the same for all the e-commerce companies and Flipkart will have to go through this tumultuous period. This is going to negatively impact 2019-2020 fiscal net income and FDI policy will play a huge role in this.

-Unmesh Phule

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