Had an interesting discussion at the CNBC studio yesterday about the Flipkart-Myntra deal with Menaka Doshi & Senthil Chengalvarayan!
Am posting the transcript from their site. The video isn’t on YouTube, so unfortunately it can’t be embedded here. Please watch the video and feel free to add your analysis in the comments below. Enjoy!
PS: Do watch it till the end. It gets funny 🙂
After homegrown e-retailer Flipkart acquired online fashion retailer Myntra for USD 300-350 million or nearly Rs 2,000 crore, the Indian e-commerce industry is set to give a tough competition to its global peers like Amazon.
Flipkart-Myntra not a convincing deal yet: Alok Kejriwal, CEO & Co-founder, Games2Win.com decodes the pros and cons of the whole deal and whether it is set to benefit the Indian online retail industry. According to him the deal is not convincing enough in the sense, there is a big question mark on whether it is really going to help the retail industry per se. Below is the transcript of Alok Kejriwal’s interview to CNBC-TV18’s Menaka Doshi and Senthil Chengalvarayan.
Menaka: What do you make of this deal?
Alok: Here goes another deal, another one bites the dust. It’s not convincing enough. The question is what is it really going to for the industry because we really need to think about the industry per se. There are no numbers and people are just swapping shares this is not market driven or market-led change of value. It is two people with two common investors who will negotiate this for a long time.
Menaka: I don’t get why Flipkart would at this nascent stage in their business feel the need to go out there and buy an even more nascent online business which sells clothes which Flipkart does anyways and then goes on to say, but we are going to maintain it as an independent entity. What is the compelling reason for this deal outside of the fact that they had common private equity investors?
Alok: You are not supposed to examine this deal from a consumer point of view or from a business point of view but from a balance sheet point of view, because Amazon is like a King Kong in town who is beating his chest loud and hard that people just can’t sleep anymore. So, if you just look at the gravity with which Amazon has entered the market then anything that can help you scrape through another quarter in terms of funding, financing and promise is big thing.
Senthil: Amazon today is only in the market place where 100 percent foreign direct investment (FDI) is allowed, it is inventory based business-to-consumer (B2C) module. It is very likely that 100 FDI could be allowed in that. If that happens are you saying no Indian e-commerce thing will survive?
Alok: Look at the numbers. Flipkart declared a USD 1 billion gross merchandise value (GMV) last year, Rs 6000 crore. They have lost typically USD 250 million on that. So, the negative margin is 25 percent. Now, if the go up to USD 2 billion GMV they are going to lose USD 500 million. You are going to re-finance the company USD 250 million to USD 500 million every year just to stay relevant.
Q: So could it be that they are building to sell?
Alok: It depends – the markets are not forgiving anymore because Amazon got bashed up two quarters back and now – it is like either make money or get out.
For the entire interview watch video.
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Chetan Rane
I always loves to hear from The Kejriwal who is not in Jail 🙂
Thank you Alok. It was really good insight on the Bansal’s Deal.
Anamika Joshi
How come that you are never boring and have this potential of making any interview interesting with your wits. , I am glad I understood most of the things that you said on a topic i am miserable at! 🙂