Flipkart’s chief executive says the Walmart-owned e-commerce group will scale back deals and hiring to contain costs as its losses skyrocket amid stiff competition from Amazon and Reliance.
In an interview with the Financial Times, CEO Kalyan Krishnamurthy said the recent funding crisis in global technology meant Flipkart ended an acquisition spree that saw the company spend up to $500 million to expand from travel to online to diversify healthcare.
“We have stopped or taken a break from these mergers and acquisitions,” he said last week. “What we’ve decided as a company is that over the next year or two, we’re going to make sure that these big investments that we’re making have a lot of customer adoption, and then we’re going to move onto the next M&As.”
He added that Flipkart would not be cutting jobs, but would be hiring “significantly fewer than in recent years.”
Losses of parent company Flipkart Internet Private for the fiscal year ended March rose more than 50 percent year-on-year to Rs. 43.6 billion (US$528 million). Walmart acquired the company, an early star of Indian e-commerce, for $16 billion in 2018.
The size and potential of India’s e-commerce market has attracted a number of other strong competitors, from Amazon to Indian conglomerates like Mukesh Ambani’s Reliance Industries and Tata, both of which have launched e-commerce arms.
However, Flipkart’s financial performance shows how challenging India’s relatively fledgling e-commerce sector remains. Revenue soared over 30 per cent to Rs 106 billion in the last financial year, but losses were driven by a rise in costs including advertising and transport.
A report by Bain last month in partnership with Flipkart estimates that India’s e-commerce shopper base will double from just under 200 million to over 400 million by 2027, thanks to the growing adoption of smartphones and digital services.
The company remains a leader in major e-commerce categories like fashion and smartphones, said Satish Meena, an independent analyst. But it’s harder to keep up with newer entrants like Reliance and Meesho, who count Meta as an investor, in fast-growing markets like grocery and social commerce, he said.
“The profitability is nowhere to be seen,” Meena added. “Companies will spend more and will continue to spend.”
Krishnamurthy said Flipkart has been pumping money into expanding its supply chain and into new initiatives like Shopsy, which launched last year to target low-quality consumers outside of metropolitan India.
He argued that the Indian e-commerce market is large and fast enough to host several major competitors. The sector remains “dynamic given the size of the market,” he said.
On profitability, he said, “The money spend that we have today is to build products, technology and supply chains” for younger businesses like travel. “It’s not like we have to move on [funding] Companies that we founded five to ten years ago. It is more to fund future ambitions,” he added.
Krishnamurthy denied that the company needed further funding, adding that it will seek to list once the global market turmoil stabilizes. Flipkart raised $3.6 billion in funding last year for a $37.6 billion valuation, with major shareholder Walmart leading the round alongside SoftBank and Singapore’s sovereign wealth fund GIC.
Instead, an IPO is pending. “Probably a year from now we will have a discussion with our board on how we should think about a public listing,” he said.