 "This problem haunts both Flipkart and China Investment Corporation")
By Rohin Dharmakumar
One is the largest E-commerce seller in India, founded by two plucky friends who studied together at IIT-Delhi and worked together in Amazon, India. Easily India’s most respected and loved E-commerce site, Flipkart’s revenue is estimated to be somewhere between $500 million and $1 billion, to create which it has had to pull in around $200 million in venture funding over four rounds till now.
The other is the $500 billion sovereign investment fund of a country that seeks to reclaim its pole position in the global pecking order, a position it feels was stolen from it through a global conspiracy led by western imperialist powers and Japan.
[caption id=“attachment_822239” align=“alignleft” width=“380”] Could it be that Flipkart and CIC, two very different organizations, share a common cause for their inability to attract a financial leader - a “poisoned chalice”?[/caption]
But since early this year, the two firms have been struggling to fill in a critical leadership position.
In Flipkart’s case it has, since February this year, been unable to find a Chief Financial Officer after its erstwhile CFO Karandeep Singh resigned unexpectedly. Singh, an experienced professional had joined Flipkart just over a year before his resignation. He was widely regarded as sort of the “grown up” hired to steer Flipkart towards a successful IPO, akin to, say, Sheryl Sandberg at Facebook.
Needless to say Singh’s exit came as a huge shock to entrepreneurs, investors and keen observers of the E-commerce sector in India. Worse, Flipkart has been unable to find a capable replacement for Singh as CFO in the ensuing months. And yesterday it appointed Kalyan Krishnamurthy, an employee of Tiger Global - arguably Flipkart’s biggest, if not majority investor - as interim CFO. While co-founder and COO Binny Bansal told VC Circle that “in the meantime, the company has already started the search for a full-time CFO”, the fact that an interim CFO needed to be appointed nearly four months after the previous one’s resignation means that Flipkart estimates it might be some more months before it can fill such a critical position. A well-funded, market-leading and much-loved firm not being able to find a good candidate in what is currently a buyer’s market isn’t ever good news. Moreover, Flipkart’s stupendous growth has always been accompanied by rumours and n ews about its less-than-stellar organizational culture where who-you-knew mattered more than what-you-were.
Cut to CIC, China’s grandiose plan to kill two birds with one stone - generate better returns on its gargantuan foreign exchange reserves through investment, and gain boardroom seats in large global firms. B ut, as a Financial Times article pointed out yesterday, CIC too has been struggling to find a new head since March this year.
“China Investment Corporation has been without a chairman since March when its former head Lou Jiwei became finance minister. The search for a replacement appears set to continue as the latest nominee, Shanghai vice-mayor Tu Guangshao, is very reluctant to take the job, the people said. They added that Yi Gang, a central bank deputy governor, had already declined the post.
“Those with the right qualifications don’t want the job. Those who want the job don’t have the right qualifications,” said one CIC executive, who confirmed that the fund was having a hard time finding a new leader.”
Since it’s launch in 2007, CIC has made a series of dud or low-return investments. FT reports than it generated 3.8 percent cumulative annualized returns between 2007 and 2011.
But low returns are only a symptom that CIC’s prospective candidates might at best be wary of. The really smart ones might even view that as a great opportunity to show improvement. Instead the underlying disease that most are running away from is this:
“The concern for those who have been asked to run CIC is that the wealth fund may have nasty surprises on its books and they are afraid it will prove a poisoned chalice if they bear the blame for investments that fare poorly, the people said.”
In Flipkart’s case, for a company that generates and utilizes enormous amounts of money (its monthly losses, though falling, are privately estimated to be a few million dollars) the Finance function ought to be super critical. And yet, it has never managed to retain people who led that function.
For nearly a year before Karandeep Singh’s appointment, Flipkart didn’t have a formal head for its Finance function. And Tapan Kumar Das, the person who led the function prior to that, resigned after just over a year, after expressing his unwillingness to sign the company’s financial statements.
Could it be that Flipkart and CIC, two very different organizations, share a common cause for their inability to attract a financial leader - a “poisoned chalice”?
Rohin Dharmakumar writes for Forbes India
(Disclaimer: Flipkart is a competitor to Homeshop18.com, a company owned by Network 18, Firstpost’s parent company.)
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