What's common between Flipkart and China Investment Corporation?

Their inability to attract a financial leader

Rohin Dharmakumar
Published: 28, May 2013

After relatively underutilized degrees in computer sciences engineering and an MBA followed by a decade of tangential career choices ranging from technology outsourcing to public relations, I realized my passion lay in connecting the dots between market opportunities, technology, entrepreneurs and the ecosystems that bind them together. A big fan of underdogs and of possibilities, I try my best to tell stories the way my brain sees them.

Flipkart-CIC Logos

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 to $1 billion, to create which it has had to pull in around $200 million in venture funding over four rounds till now. (Disclaimer: Flipkart is a competitor to Homeshop18.com, a company owned by Network 18, Forbes India's parent company.)

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.

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 4 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 news 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. But, 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"?

  • Parimi S.R.Murthy

    Interesting article! Having known that people are not (made to)sticking the post of CFO, better employ somebody who has successful contributions and reasonable outcome! Such person will contribute, deliver good results, stick & will grow with the organisation. One should not wait & see mere qualification, but look at virtues.

    on Jun 16, 2013
  • Sudhir M

    Hi Rohin, Did you see that Flipkart has shutdown the "TV / Audio / Video" and "Home appliances" segments on their site? Please shed more light on this development. Thanks

    on Jun 3, 2013
  • Amit Khanna

    Hi Rohin, This is an excellent article. Popular firms find it tough to get senior talent, i guess underlines that fact that the financial/legal realities of the company is not good. In china CIC would be facing tough competition making their future not so rosy. Flipkart is popular among its customers but not with senior-employees. This clearly points to deep legal / financial troubles. Also last year enforcement directorate had announced an investigation about the FEMA violation by Flipkart, any update on the same? I guess your investigative article on the same would be greatly appreciated by your audience. ~Regards

    on May 29, 2013
  • MBA Graduate

    It is nice to see different articles like this. There will always be people who misinterpret the writer's view. I thought it was a pretty good article, bringing flavour to what might otherwise have just been bland news on 'Flipkart having troubles with finding a Finance Head'. Hope you continue the good job and keep better articles coming our way!

    on May 29, 2013
  • Desi Product Manager

    You're making very valid points... But this may not be the complete picture for either organization. In fact, I doubt if anyone outside the "inner circle" will know the true story. Flipkart was always in trouble due to the market it operates in, e-commerce. In this regard, I have a lot of respect for Indiaplaza who survived for so long. If you're looking at Flipkart's recruitments, you should also look at exits. Have no ideas on CIC and will accept your analysis.

    on May 29, 2013
  • Gaurav Bhatnagar

    That analogy made no sense whatsoever! This is worse than comparing apples and oranges. Also, the allegations being made are pretty serious and without any basis. I am surprised to see an article like this hosted on Forbes website.

    on May 28, 2013
    • Rohin Dharmakumar

      Gaurav, where did you spot an analogy? I quite clearly specified that Flipkart and CIC were very different organizations, but both facing the same problem, and arguably due to the same underlying reason. That is not an analogy.

      on May 28, 2013
  • Amol

    Guys, you are simply spoiling Forbes's brand image. Such negatively biased articles is one of the reason I unsubscribed from print edition of Forbes India. Now I'm unsubscribing from all other news feeds. You are doing to Flipkart, what other media houses are doing to Narendra Modi. ;)

    on May 28, 2013
    • Rohin Dharmakumar

      Amol, I'm curious why you consider this "negatively biased"? Which specific point or fact led you to that conclusion? And if you're implying that daring to provide an alternate point of view or narrative on a crowd favourite (Narendra Modi or Flipkart) is bad journalism, then I'm only happy to continue practicing it :)

      on May 28, 2013
  • IT Professional

    There he goes - its Rohin Dharmakumar again and its no surprise that he writes another negatively biased article about Flipkart. Sensational journalism appears to sell - validity of inference be damned. How is he even comparing CIC with Flipkart - one is an investment corporation and the other an eCommerce company. I guess he would next compare earnings of a night club, bar (replace with any other entity peddling vice) with the earnings of an educational institution - after all both are in the business of making money, just the way CIC and Flipkart are same - both dont have a head of finance.

    on May 28, 2013
    • Rohin Dharmakumar

      "IT Professional", what part of this post appeared sensational to you? That Flipkart has lost multiple finance leads in quick succession? That it is having trouble finding capable candidates to man Finance? That one of its erstwhile finance leads had alleged their accounts aren't kosher? Unless you're implying that merely pointing out the obvious is a "negative bias", in which case I plead guilty as charged :) And please do point out to me where I've "compared" Flipkart with CIC. All I've said is that they are two very different organizations, facing the same problem, probably for the same reason. I am not comparing their business models, so please don't insert straw men into the argument.

      on May 28, 2013
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