Flipkart co-founder Binny Bansal, one of the country’s top Internet entrepreneurs, publicly stated that the revised framework for foreign investment in the Indian e-commerce sector is bad for small startups and early-stage companies. The change in the regulations will, in the foreseeable future, come in the way of innovation and company creation, along with being a deterrent for investors who want to take a long-term view of India. Upcoming startups are going to be hit the hardest by these changes as the big companies will figure out how to navigate through this issue as they have the required money power and large teams. There is uncertainty and confusion in the market as many startups are seeing their funding rounds being put on hold, as there is no clarity on how to do business. The ever-changing policies wreak havoc on businesses, especially the upcoming ones.
Citing the example of a four-year-old Chinese social e-commerce company, Pinduoduo, which went public six months ago valued at $23 billion, Bansal said he was worried that a similar sort of innovation would be stymied in India amid the ever-changing regulations. Despite having to compete with well-established players like Alibaba in the Chinese market, Pinduoduo became huge.
According to the new rules which kicked in on February 1, online retailers like Amazon and Walmart-owned Flipkart cannot sell products through preferred merchants in which they hold an equity stake. All the more, the wholesale arms of Amazon and Flipkart cannot supply more than 25% of goods to these vendors. These wholesale arms were specifically set up to serve these big sellers. Some are speculating that because of the changing regulatory environment and adversarial policies, a Walmart retreat from India is quite probable.
After his exit from Flipkart, Bansal is actively investing in business startups personally and through a fund called 021. He owns 4% of Flipkart and holds a board position at the e-commerce major. Following the Walmart buyout, he left the company he co-founded with Sachin Bansal after a special team was set up to investigate against him on charges of personal misconduct. None of the charges were found to be true though. He is believed to have moved on since then and was looking ahead to new opportunities by investing in business startups.
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