Flipkart Now Feels Like Princely State Reporting To Masters At East India Company: InnerChef Founder

News reports of Flipkart planning to raise a significant new round from Walmart have drawn varied reactions from the Indian startup ecosystem.

“Walmart to acquire a large stake in Flipkart. This company now feels like a valued Indian Princely State reporting to the lords and masters at East India Company,” tweeted InnerChef co-founder Rajesh Sawhney, who also runs the GSF Accelerator and has invested in companies like HackerEarth and Flintobox. Sawhney was reacting to an Economic Times report which had said that Walmart could acquire a majority share in Flipkart and value it at $20 billion, which is nearly twice its current valuation.

Walmart won’t be Flipkart’s first foreign investor — Flipkart’s investor list already looks like something out of the UN General Assembly. Flipkart’s biggest investor, Softbank, which owns 23% of the company, is Japanese. Tiger Global, which owns 20% of the company, is based out of the US. Naspers, which owns 13% of the company is South African, and Tencent, which owns 6%, is Chinese. The only major Indian holding in the company is through founders Sachin Bansal and Binny Bansal, who now together own only about 10% of Flipkart.

It’s not unusual for companies to have foreign backers — companies like Facebook, Twitter, Groupon and Uber have all had significant foreign holdings. But Flipkart’s long list of foreign investors doesn’t sit well with its long-standing policy of advocating against “capital dumping” in India. Flipkart has repeatedly, without naming Amazon, said that foreign companies shouldn’t be allowed to invest in India and undercut domestic competition. Along with Ola, MakeMyTrip and some other companies, Flipkart even formed IndiaTech.org, a lobby group that seeks protection for domestic firms from foreign competitors.

It’s not hard to see the irony in Flipkart’s argument when it itself is now controlled by a consortium of foreign investor. “It’s not (capital dumping) if the  money is for them,” joked Nikhil Pahwa. 

India is fast emerging as a battleground where global superpowers are carrying out proxy battles. In e-commerce, Amazon and Alibaba have extended their global rivalry to India –Alibaba has backed Paytm, and competes with Amazon’s India arm. Amazon’s American rivals, eBay And Microsoft, have in turn backed Flipkart, and are using it as a front to take on Amazon. A similar story is playing out in grocery delivery, where Alibaba-backed Big Basket and Softbank-backed Grofers are taking on Amazon. 

Amidst this land grab, Indian companies have had no choice but to accept foreign money in order to be able to compete. Things have come to such a head that it’s hard to think of a major Indian consumer startup that’s still majority-owned by Indian money. While comparisons with the East India company and princely states might sound dire, they might not be entirely misplaced.